Merchant Capital was established in 2012 as an alternative provider of working capital, tailoured specifically for retail SMES in South Africa. Merchant Capital is one of the founding members of the South African SME Finance Association (SASFA), a national, self-regulating body for alternate finance companies. It utilises a distinctive funding and payment model to provide a working capital injection for growing businesses.
Merchant Capital offers a new category of SME funding called merchant cash advance to support the growth and development of South African businesses.
The Merchant Capital solution is a way of ensuring that the SME business gains critical cash flow that enables them to grow and take advantage of opportunities that are beneficial for their business, while keeping debt and charges under control and transparent at the outset.
They have expertise in and provide working capital solutions for businesses in the following sectors:
• Restaurants and hospitality;
• Fuel retail;
• Health and beauty;
• Fashion retail;
• Automotive retailers;
• Building, office and hardware;
• Electronics and furniture retail;
• Supermarkets; and
• The franchise market.
Franchise owners of Nando’s, Engen, Sorbet, and Spur have benefited from Merchant Capital’s solution. The funds can be used by businesses for a multitude for purposed including hiring more employees, purchasing new equipment, refurbishing their store, purchasing more stock, and even for marketing.
How does the process work?
The process is different from that of a traditional bank. Merchant Capital provides a cash advance, based on the previous 12-month card turnover through the point-of-sale machine. The cash advance is made upfront as a lump sum with no fixed interest rate and no fixed repayment term.
Repayment is made via a small, fixed percentage of daily card transactions until the cash advance is paid off. Due to repayments fluctuating in line with turnover, this financial product is ideal for seasonal businesses that are cyclical (like companies on the coast).
Merchant Capital provides the funds businesses require to take the next step in its growth and collects the percentage of card sales until the amount is paid back. Once 70% of the cash advance is repaid, the business automatically qualifies for a re-advance on the same or better terms than the first, allowing the business to grow further. Currently 80% of clientele renew with Merchant Capital.
The amount provided to the business is agreed upon upfront and it does not change. It can take the SME three months to pay back the cash advance or it can take three years. It is a genuine partnership model because in a good month when turnover is high, more is collected, but in slower months, payments reduce accordingly.
What are the criteria for applying for working capital finance?
Merchant Capital’s finance solution is ideal for business owners who have a monthly average of over R30 000 in credit card sales and/or monthly EFT turnover of R150 000 per month and have been operational for 6 to 12 months. Business owners do not need to pledge assets, there are no hidden costs and flexible repayment terms are agreed with the owner to take their particular considerations into account.
Requirements to apply for Merchant Capital finance include:
• A completed Merchant Capital application form;
• Business banks statement for the last three months;
• Business registration documents;
• ID documents of each directors;
• Business insurance schedule;
• Business lease agreement;
• 13 months of credit card transaction statement or 12 months of bank statements; and
• Franchise agreement if applicable.
At Dream Team Capital, we understand the complexities of the funding agencies across South Africa and the application criteria. We have assisted numerous entrepreneurs through the application process to provide access to funding for businesses, and we can assist you with the same.
Contact us for more information on funding through Merchant Capital.