Small business warned about cheap shortcuts for power

Small businesses have been warned about taking cheap shortcuts for power as load shedding escalates yet again. These cheap shortcuts can turn out to be more expensive.

Before, only businesses that could afford it opted for alternative power, but now all businesses need an alternative to continue operating. In addition, businesses that are too large for the plug-and-play inverter option have larger power requirements that need additional financing, says Eli Michal, CEO of fintech lender Payabill.

Payabill was founded to assist businesses that do not have the funds today to buy stock from wholesalers to help them pay immediately. “We settle the account with the supplier for goods without taking money out of a company’s cash flow. The company then installs or resells stock and has extended terms to repay us. It enables companies to smooth out their cash flow and earn more profit in the long run.”

Michal says the ongoing blackouts created new demand for the company with two new markets: the installers, retailers and resellers that make use of Payabill’s trade finance solution with loans of up to R1 million and the SMEs, as few can afford to install alternative power and pay cash for a completely professionally installed system.

ALSO READ: Cost of rolling blackouts exceeds R1.2 trillion, small business suffers most

Turnover size not always power size needed

Asset finance from Payabill fills this gap by paying the installer on behalf of an SME, giving them time to pay off the expense.

Michal says the size of the business’ turnover does not have much to do with the size of the alternative power system needed. “You could have a business with a turnover of R15 million per year that only needs a trolley inverter or you could have a business with a turnover of R3 million that needs a much bigger setup because of its power requirements.”

Those that have low power requirements, such as a home office, most likely will not need professional installers and can simply buy a lithium trolley inverter from a retailer which is appropriate for stage 6.

The cost varies between R10 000 to R20 000 for 750-1500 watts for a plug-and-play solution. However, Michal warns against lead acid or gel batteries, which are cheaper than lithium batteries, but will not last during stage 6 loadshedding.

Those with medium power needs typically include a small office environment, with three to five staff or a small shop that requires power to run basics such as lights and laptops. They need a solid seven to eight hours of uninterrupted work and need a 3kVA to 5kVA inverter with lithium batteries and automatic switchover at a cost of R30 000 to R80 000. They can upgrade to solar in time which would offer a tax benefit and electricity savings.

ALSO READ: An opportunity for solar suppliers to power up small businesses

Bigger business power needs

Michal says the problems start when businesses’ power needs are bigger than this. “They need between 5kVA to 12kVA and believe that they can set up a power solution by themselves. Things start to get messy, because owners or managers find an inverter at half the price everyone else charges.

“But it has no warranty and the owner finds a friend who is not an electrician who starts messing around with the distribution board. It never ends well. We will not fund this approach. We find the most risk in the system at the moment is where people try to cut costs by using cheap equipment and unqualified installers.”

 This is where Payabill can connect SMEs with competent installers and solid suppliers. Michal says financing alternative backup power does not show immediate cost savings, but it reduces loadshedding anxiety and allows staff to perform optimally.

“If a business buys the right inverter, it could upgrade in time to solar panels that will give them more power and will result in savings and a tax benefit. Most businesses operate during the day when the sun shines so they can get the best from their solar panels.”