OMNI Financial Group Limited and the Inter-American Development Bank (IDB) will expand access to finance for Bahamian small and medium enterprises (SMEs), through the provision of its new product -- Account Receivable Financing (Factoring) -- thanks to a US$1 million contingent recovery loan from the IDB’s Multilateral Investment Fund (MIF). The loan will be reimbursable, depending on the business performance of this new line of financial products and services. The new service will be technology driven through OMNI’s digital platform.
This will be the first financial technology-enabled option of its kind available to Bahamian business owners. Not only will it facilitate SMEs’ access to capital, thereby leveraging commercial relationships with large corporates, but it will also incentivize large corporations to enter into commercial relationships with SMEs, especially those located in the Family Islands.
Both OMNI and the IDB saw the need to provide alternative financing options for smaller companies in The Bahamas, specifically those involved in manufacturing, processing, agriculture and other cottage industries. The introduction of factoring will provide a financing alternative for these businesses, and will help them to remain competitive in today’s fast paced market where access to capital is a constant challenge.
Introducing factoring to the Bahamian market has been a long journey for OMNI. After a thorough due diligence process conducted by the IDB, OMNI was approved for US$1,000,000 funding through the MIF, a private sector arm of the IDB Group, on December 7, 2017. Prior to this project approval, the MIF had never provided a credit facility to a private Bahamian company.
“The fact that the MIF has granted a loan to the Omni Financial Group is very significant, as it highlights Omni’s ability to qualify for multilateral financing,”Michelle Evans, a private sector analyst with the IDB
Harvey Morris, Chief Executive Officer of OMNI Financial Group Limited, has been at the helm of OMNI for over eleven years and understands first-hand the struggles in growing a company through its early years. OMNI’s Morris noted, “Cash management is the main reason why most businesses fail, not necessarily the lack of business…Working with larger corporations for a small business person is both a blessing and a curse. You sell more, but you also have a longer wait time to receive the payment necessary to facilitate the replenishing.” Morris emphasized, “Factoring will close this gap by providing immediate access to outstanding cash so owners can concentrate on growing their business not chasing down money.”
FOR ADDITIONAL INFORMATION CONTACT:
Business Development Manager
Office: 394-6761 ext: 2006
How does Factoring Work? Factoring, commonly referred to as accounts receivable-financing, is a financial transaction in which a business sells its accounts receivable to a third party, at a discount. Factoring is not a loan; it does not create a liability on the balance sheet or restrict assets. It is the sale of an asset, such as the invoice. In a factoring arrangement, the client (a business owner) makes a sale, delivers the product/service to the vendor, and generates an invoice. The factor (a funding source) buys the right to collect on that invoice by agreeing to pay the invoice’s face value less a discount. The factor pays a certain percentage of the face value of the invoices immediately, and the remainder, less the discount, when the vendor pays.Because factors extend credit not to their clients, but to their clients’ vendors, the vendors’ ability to pay is more of a contingency of the client factor-funding. That means a company with creditworthy customers may be able to receive funding, even if it cannot qualify for a loan.
Who Benefits? OMNI will work with the Bahamas Agriculture and Industrial Corporation (BAIC) in the initial phase of the program. As processing businesses are usually capital-intensive, requiring large amounts of capital, BAIC is immediately able to pinpoint SMEs that will benefit from this type of funding
About the Multilateral Investment Fund (MIF): The Multilateral Investment Fund (MIF) serves as the Inter-American Development Bank’s (IDB) innovation laboratory to promote private sector-led development that benefits low-income populations, their businesses, and their households. The MIF aims to provide these groups with the tools to boost their income: access to markets and the skills to compete in those markets; access to finance; and access to basic services, including green technology.
About the International Development Bank (IDB) The Inter-American Development Bank is devoted to improving lives. Established in 1959, and operating in The Bahamas since 1977, the IDB is a leading source of long-term financing for economic, social and institutional development in Latin America and the Caribbean. The IDB also conducts cutting-edge research and provides policy advice, technical assistance and training to public and private sector clients throughout the region.