A German financing arrangement firm, Lenz Finance Management Company, has partnered two institutions in Ghana to provide cheaper credit lines to companies in Ghana that source supplies and machinery from Germany.
Its local partners are the Delegation of German Industries and Commerce in Ghana (AHK) and the Ghanaian-German Economic Association (GGEA), which would receive applications from interested companies in Ghana and forward them to Lenz for processing.
The financing arrangement, which also comes with the option of Lenz helping to look for supply sources in Germany for companies that need it, attracts total cost of credit of up to 10 per cent per annum, with a grace period of six months before repayment starts. Applicants can access credit up to 10 million euros for sourcing capital goods.
Credit tenor
The facility, christened “Sourcing and Financing in Germany,” has repayment periods ranging between six and 60 months. The credits are insured and the arranger, Lenz Finance Management (LFM), also assists in looking for supplier’s credit; another financial requirement for importers.
AHK Ghana has designated an officer, Mrs Helen Djan, while the GGEA has designated Ms Nancy Akuamoah, to be in charge of processing applications from the country to be submitted to the financial partner to conduct credit eligibility on the customer companies before arriving at a decision to offer the product.
Applications take between three to six months for the credit line to be ready.
The Chief Executive Officer of Lenz Finance Management, Mr Wolfgang Lenz, explained that credit eligibility would be determined based on vital details of the company, including certificate of incorporation, three years financial statements of the company, audited to international standards and financial ratios.
“We will subject the customers to all the requirements of the local bank, but the difference here is that the total cost is significantly cheaper and we find supply sources for companies that need them,” Mr Lenz explained.
The product comes in handy when the AGI Business Barometer survey has brought access to credit as the topmost challenge affecting their businesses.
The cost of credit, which averages 26 per cent a year in the country, came up as the third biggest challenge affecting businesses in the survey that covered about 300 chief executives.
Eligibility
Eligible companies must be operating for not less than three years; must have a yearly turnover of not less than two million euros and must have single transaction value equivalent to a minimum of 100,000 euros for consumer goods and 500,000 euros for capital goods (machinery and equipment), among others.
LFM, which has been operating in the country on a pilot basis for close to seven years, has a standing portfolio of about 15 million euros in financing capital goods and inputs in Ghana alone.
Mr Lenz said the company decided to expand its operations in Ghana due to the country’s positioning as a frontrunner in Africa’s development and contribution to world productivity for the next decade.
“Ghana is appreciated by the international business community as a conducive place to do business, in addition to the peace and stability. But the cost of credit continues to be a constraint to business expansion and that is where we come in to close the gap,” the CEO of LFM said.
The partnership
The Delegate of the German Industry and Commerce in Ghana, Mr Patrick Martens, noted that AHK had the mandate to promote bilateral trade between Ghana and Germany and Lenz Finance was an appropriate partner helping them to achieve their mandate.
“Trade volumes between the two countries have not reached our expectation as challenges in access and cost of finance remain. At AHK, we are not bankers, but we have the network that we leverage and Lenz, which has been in Ghana for seven years, has decided to partner us and expand their operation,” Mr Martens explained.
The President of the GGEA, Mr Stephen Antwi, said Ghanaian entrepreneurs were subjected to strenuous credit cost that inhibited their expansion and growth locally and regionally, therefore, the product would help them to overcome the credit challenge.
“Now a new day has dawned; this product is aimed at making businesses previously constrained by the high cost of credit to break free and expand,” Mr Antwi said.