How to earn money every time tenderpreneurs make money
How to earn money? The Government devotes over R600 Billion a year to procure services from businesses and enact its mandate. The government is the big buyer of anything in the country. In line with understanding its power, it has made a mindful effort to try to stimulate the growth of small businesses, by committing 30% of its total spend to small businesses. This means a total of R200 Billion of its spending is earmarked for emergent small businesses.
Despite the effort from the government to empower small businesses, many small businesses fail to secure such contracts due to a lack of capital. The government awards tenders to companies, then companies must deliver and receive their payments within 60 days, which is a huge barrier for companies because they do not have the capital to deliver. As a result, entrepreneurs who do get these contracts are forced to give up to 25% of the contract away to shark businesses that are their only option for financing.
On one side, how do you make the workings of government efficient and at the same time allow them to play a critical role in the development of small businesses?
We feel this is where a people-owned funding mechanism comes in. You contribute to this campaign; we then use the proceeds to pay for the needs of entrepreneurs who have contracts with the government, and they then pay us 6% of the value of their purchase orders once they receive their payment.
e.g. Sipho just received a contract with the Mpumalanga government to deliver 500 chairs for R50 000.The cost to manufacture these for him is R20 000. We, as the people, extend him this R20 000 and he agrees to pay us this back as well as 6% of the invoice value (R50 000 * 6% = R3000). He takes 3 weeks to manufacture & deliver these chairs. Mpumalanga agrees to pay him 30 days from the Statement (or after delivery) so he pays us back R23 000 almost 60 days from the time we advanced the capital. He now has R22 000 in profit. He can now use this to finance his next purchase and request less from us. The ultimate objective is to allow entrepreneurs to become self-reliant.
We have validated this model with a few small entrepreneurs and have developed relationships with certain municipalities to execute on this.
HOW IT WORKS:
- You contribute to this campaign (minimum R100; Maximum R100 000).
- 10% of your contribution is deducted from the fund to cover administrative costs (around 6% is lost in banking fees when receiving, transferring, and moving the capital around. The other 4% are running and administrative costs such as site visits for entrepreneur procurement as well as legal onboarding).
- At the end of each month, your money is put to work as described in the example. We expect it to do 6 purchase orders with your money in a year (from disbursement to entrepreneur; to receiving payment back takes anywhere from 45 days to 60 days).
- We take 0,6% as a service fee for management of the process (hence leaving you with 105,4% per rotation).
- At the end of 12 months from the time you contributed, we then pay you back your original capital as well as the facilitation fee. On six purchase orders per year, we expect this to be 124%. Put another way, at the end of 12 months we expect to pay you R124 for every R100 you put in today.
- The entire payment process will be managed by The People’s Fund and Audited by SnB Chartered Accountants & Auditors ( Practice Number 966205)
NB!! First & foremost, we need to declare that this does not constitute financial advice in any way and that we have made our projections based on historical yields. Buying assets that will be run by a small business is risky and you should only commit money you are willing to lose.
We have made a table of expected returns.
|Contribution||payback after 12 months||Return|
|R 100,00||R 124,00||24%|
|R 1 000,00||R 1 240,00||24%|
|R 10 000,00||R 12 400,00||24%|
|R 100 000,00||R 124 000,00||24%|
|R 1 000 000,00||R 1 240 000,00||24%|
NB: There is a handling fee associated with the payment gateway you choose to use.
Direct Bank Transfer 0%
i-Pay Instant EFT 3%
Setl – It 3%
Payfast R3 + 5%