Business Partners, a specialist risk finance company for formal small and medium enterprises (SMEs), has launched two specialized SME funds for the property sector, both aimed at driving property ownership and enabling entrepreneurs to grow their equity base.

Nazeem Martin, MD at Business Partners, said that despite South Africa’s economic challenges, the local commercial property market continues to offer value for potential investors, and in particular, entrepreneurs.

“It is anticipated that quality commercial and industrial properties in the country will continue to boast risk adjusted yields above most other investment classes in the near future,” he said.

“We therefore believe that commercial and industrial property remains an attractive investment for entrepreneurs, either as a sound long-term investment or to secure tenure for their own business operations,” he added.

The R200m ($16.69m) Business Partners Property Fund will provide affordable finance for SMEs across all industries, allowing business owners to purchase and/or refinance their own business premises.

No deposit is required for this type of funding, and the Fund will offer 100% financing to qualifying businesses.

Martin said that generally, conventional financiers require a cash deposit before financing a property deal.

“The Property Fund will cater to entrepreneurs with viable operating businesses, in existence for over three years, who wish to purchase their own premises, but who have limited capital or security to contribute, or who do not want to compromise their business’ cash resources for the deposit,” he said.

Martin said that by purchasing property for a business premises, business owners can save up to 50% on premises costs over a 10-year period, without compromising the business’ cash resources.

In addition, the R250m ($20.87m) Business Partners Joint Venture Property Fund will provide equity or term finance, or a combination of both, for the purchase of a multi tenanted commercial, industrial or retail property valued between R2m ($0.17m) and R120m ($10.02m).

Property investments in risk adjusted good locations – those offering good growth and/or return on investment, preferably in metropolitan areas – will be considered for this fund, and property investors are able to play an active role in managing the investment, but can also choose to be a passive investor.

The Fund will also consider a viable property investment that has been over-geared and requires a restructuring of the existing debt, converting from a debt to equity finance model.

The specialized funds form part of the company’s square peg movement – a campaign aimed at providing further funding, support and mentorship for entrepreneurs with the aim to unleash South Africa’s SMEs.

The campaign, launched in September 2014, will see the company introduce a series of specialized funds, each focusing on the upliftment of a particular local sector.

To date, a R300m ($25.04m) Manufacturing Fund and a R150m ($12.52m) Education Fund have been launched.

“With the launch of these new funds, we seek to achieve a greater developmental impact in the local SME sector. This is to ensure that local entrepreneurs are able to play their rightful role of generating wealth, growing the economy and creating jobs,” said Martin.