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Show me the money

So where does the security industry acquire financing for projects? Is this an area that suppliers dabble in or is it purely the domain of registered financial institutions? Hi-Tech Security Solutions spoke to industry representatives about the subject.

John Loftus, MD of MASS Solutions, said that some installers do offer finance options to the end user. “However, this is not common in the security industry and, when it does exist, it seems to be predominantly tied in to rental contracts.”

John Loftus.

Loftus pointed out that there are a couple of companies that specialise in financing of projects but that, in general, most end users acquire their own financing.

Loftus emphasised that one needs to carefully differentiate between what is considered to be a lease contract as opposed to a rental contract. “If one enters into a lease agreement, the product or system becomes your property once the outstanding balance is paid. Only companies under the National Credit Act who are deemed to be registered credit providers (RCP) are permitted to charge interest to lessees.

“A rental agreement, however, means that the product or system remains the property of the rental company. The exception to this is if the user decides to, at some stage during the duration of the contract, come to an arrangement with the rental company whereby they purchase the asset for a specified settlement amount,” he added.

Challenges for financiers

Financiers will, in general, only finance those items which could possibly be repossessed should the lessee repeatedly default on payment or not uphold the terms of the contract. “Therefore, items such as cabling and labour would not always be eligible for finance, whereas cameras, access equipment and similar security equipment would be,” Loftus said.

Loftus claims that refinancing projects through distributors is fraught with challenges, not least of which is the politics involved. “We find that there is a general lack of energy to change mindsets and buying patterns. For this to work, we need buy-in from the entire industry.”

Rental is an option that appeals to Loftus. “Essentially, one should carefully consider the quality of the equipment that is under consideration for rental. One would not want to place inferior quality equipment in an installation where the risk of downtime is higher. Therefore, the quality of the product as well as the quality of the installation itself, are the driving factors. If industry adopts an open mind to rental and gears up to provide it as an optional value-added service to industry, the benefits for all stakeholders could be immense.”

Ingo Mutinelli, national sales manager for Elvey said that financing is generally at the discretion of each distributor and in certain instances it is organised by the installer or integrator. “We do not find it to be common practice. This may be due to the fact that people are wary because of the constraints of the recession, coupled to the very real possibility of defaulted payments.

Ingo Mutinelli.

Credit vetting and due diligence

“In general, credit vetting is the first step in financing. The size of the project and the period of finance required are the next steps. Elvey offers various financing packages, over three- to six-month periods, such as control room infrastructure or end user installation. In all instances, some form of surety is required and we do not deal with the end user,” Mutinelli explained.

Roy Alves, country manager for Axis Communications, said that the company does organise finance for installers and integrators via its local distribution channel. “Approximately 90% of the short-term projects we supply product to are financed by Axis Communications. We emphasise that a due diligence is performed on the end user to ensure that their operation is secure.

Roy Alves.

“Where longer-term finance is offered to installers, it is generally not registered in the installer’s name. Once the project is signed off, the installer will be paid by the financing house,” Alves explained.

Alves said that because of the volume of projects financed via the company, it is able to secure preferential rates via the major registered credit providers. “We have been able to leverage our credit standing with the RCPs and add benefit not only to larger projects, but to a number of smaller projects.”

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