Companies with their backs to the wall due to Covid-19 lockdown restrictions are turning to auctions to raise much needed capital without changing the fundamentals of the business.
That’s according to Ciena Bester of the South African Institute of Auctioneers (SAIA), who said auctioning of unwanted assets provides a quick and safe way to inject capital into an ailing business, especially where business finance is difficult to obtain or cash is needed in a hurry.
Raising cash in this manner has the added advantage of minimising debt where repayment of bank loans can become problematic in cash strapped situations, she said adding that there are fewer risks involved in selling goods at an auction, the seller exchanges goods for cash and the items are sold as is where it stands.
“The process is so simple and requires an asset list to be compiled and verified by the auctioneer to ensure that all items are present and saleable and that they understand the sellers’ expectations.”
The next step is to sign a mandate that clearly stipulates the terms of engagement and allows the auctioneer to sell the items and to clarify the terms of conditions and requirements for the buyers. The auctioneer will then put together a catalogue or auction list and commence advertising in appropriate media during the run up to the auction.
“All items will be sold on auction day to the highest bidder as per the seller’s confirmation. The buyer then has a certain number of days to pay and remove his goods, transfer ownership and complete his transactions. The auctioneer will then complete and close the said auction and pay his sellers.
“Auctions enable you to buy goods in bulk at a reasonable price, some buyers can pick up great bargains if they time their buy correctly. However, it is worth noting that potential buyers must ensure that they know what they are buying as there are no refunds and no guarantees.
“Auctions are the only true reflection of the real value of an asset as the buyers will not pay more than the item is worth.”
Bester said the speed of the sale is one of the main benefits, while other factors such as convenience and the safety of the seller also make auctions a more attractive option than selling out-of-hand.
“Companies can also move equipment or stock in bulk batches or even sell all their stock or assets in one auction.”
She said there is almost no limit to what can be auctioned. “If someone wants it, they will go out and buy it.”
Most auctioneers sell moveable assets including furniture, tools, loose goods, vehicles, plant hire equipment as well as immovable property in the commercial as well as residential markets, while others specialize in the fine arts, wine and “almost anything else”.
For Bester, the most critical element of the sale is choosing a professional auctioneer who is a member of a professional body like SAIA, that ensures its member auctioneers adhere to a strict code of conduct that aligns them to a uniform way of conducting their business in a fair and just way.
“Dealing with SAIA members also offers peace of mind in the knowledge that the company is dealing with trained, professional auctioneers with the required expertise and infrastructure needed to fetch the best prices and ensure successful sales and prompt payment.”