Transport Solutions (Funding Criteria) The information contained in this document is confidential, for internal use only and may not be distributed outside the Standard Bank Group. Kathy Bell
Transport Solutions(Funding Criteria)
The information contained in this document is confidential, for internal use only and may not be distributed outside the Standard Bank Group.
Kathy Bell
Transport is the lifeblood of
SA … moving people,
moving goods
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moving goods
What we finance
Definition
• Definition of Industry Sector: Road transport or transportation is the
movement of goods and people from one place to another. Industries which
have the business of providing transport services are important to our unit.
• Our main focus is:
• Truck and Trailer
• General Road Freight Transport
• Liquid / Dry Bulk Transport (General and Hazardous Goods)
• Agricultural related Transport
• Food and Beverage Transport
• Construction, Mining and Commodity Transport
• Waste removal
• Forestry
• Bus / Coach (Commuter, bus-train, semi-luxury & luxury)
Asset Types
• Trucks: Medium, Heavy and Extra Heavy
• Buses: Commuter, Luxury, Semi-luxury
• Trailers: Side-tippers, flatdecks, etc.
• Tractors / Harvesters, etc.
Information requirement
- New Ventures
Business plan which should include, Services offered (transport of e.g. Livestock, Food, Beverages, Wood, Furniture, Parcels, etc), Customer Segments (e.g. Mining, building), Management (shareholders), Feasibility study (is your target market untapped or is there potential for growth), Budget forecasts, cashflow projections for growth), Budget forecasts, cashflow projections
Founding documents
Surety and deposit offerred depending on financeable amount
Copy of contract if finance is contract based
Motivation on why Standard Bank should consider becoming a partner in your business, e.g. competitive edge, marketing strategy, etc.
Profile of Transport Management Company
Fundamentals of Contract Assessments
The information contained in this document is confidential, for internal use only and may not be distributed outside the Standard Bank Group.
Contract Analysis
• Term: Is the term aligned to the Finance Period? The suitability of the prime
mover and trailer must be taken into account regarding kms and age relative
to the life cycle considered when assessing funding periods and contract
terms.
• Track Record: Is it a brand new contract or is there a relationship? If so, the
sub-contractor would have gone through the ‘learning curve’ and the risk is sub-contractor would have gone through the ‘learning curve’ and the risk is
lessened. We recommend direct contracts:
– SPAR with direct contractor delivering finished goods.
– UNITRANS with contract with service provider where Unitrans/Barloworld
has an Illovo Sugar direct contract (This is the only sub-contract that we
recommend.
• Product: The product been transported has a bearing on the depreciation of
an asset and therefore revenue.
Contract Analysis
• Rates of the Contract: There is a concerted drive in the industry to ensure
that volumes or tons per kilometre as well as fixed costs are set out in the
agreement to ensure viability to the transporter. This relates specifically to:
– Quantity/Volume/Tonnage to be delivered;
– Number of Loads to be delivered;
– Routes, in terms of kilometres, to be utilised.
• Payment Terms: Supplier payment terms can have an effect on a
transporters Cash Flow. Payment terms can ranges from 14 to 30 and at
times 45 days.
• Obligatory Performance Clauses: Clauses that form the basis of the client
specific performance on the contract:
– Quarterly Meetings to discuss with the Transporter any compliance or
remedies of operational/safety/legislative requirements to ensure
continuity and quality control and reduce shortfalls/losses that may accrue.
Contract Analysis
• Risk [Monetary] Clauses: Clauses that may affect the Transporters Cash
Flow due to penalty clauses for non-compliance/non-performance/non-
delivery.
• Termination: Clauses that allow grounds for the termination of an agreement.
Added to this is the Breach and/or Arbitration Clauses.
• Miscellaneous Clauses: Clauses that can have a bearing on the clients • Miscellaneous Clauses: Clauses that can have a bearing on the clients
performance:
– Additional Loads, Routes, Quantities [Does the client have spare capacity]
– Breakdown of Vehicles: Use of a third party by Contractor where costs are
borne by the Transporter.
– Fluctuation of Loads, Quantities attributed to Market Conditions: Supply &
Demand by the Contractors clientele [Non-Guaranteed Clause].
Contract Analysis
• Rate Escalation: An important factor in any contract. No contract is a contract
if it does not contain this clause.
– Fixed Rate Contracts are risky if the Rate is fixed for the life of the contract
[Municipal/Road Works]. Clients must factor CPI costs in said instances.
• Fuel Adjustment Clause: Pivotal for any transporter.
– Escalation clauses for Fuel must be adjusted as per increases or
decreases.
• Automatic Renewal Clause: Does the contract allow for a renewal after the
primary period? What time frame is allowed for the renewal or new tender
process?
• Exit or Hardship Clause: Does the contract have an ‘notice period’ in favour
of the contractor which allows exit should the market change, demand
decrease, irrespective of performance. Are there penalties involved? What is
the contractors options regarding the asset?
Owner Drivers
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OWNER Finance
Principal
Supplier
ContractMaintenance / Service
Agreement
Effective Owner Driver partnership
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OWNER
DRIVER
Finance House
Supplier
ManagementCompany
Management of
Contractors business Management
Agreement
MENTOR AND SUPPORT SERVICES
• Management Support Company
menu:
• Mentorship
• Skills transfer
• Financial Assessment and advisory
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• Obtaining economically viable
contracts
• Costing based on results of
optimisation and supply chain
integration
• Optimum vehicle configuration
• Operational services
• Administration - regulatory