Merchant Capital was established in 2012 as an alternative provider of working capital, designed 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 alternative finance companies. It uses a unique 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. As a pioneer in merchant cash advance in South Africa, Merchant Capital was established in 2012 as a provider of alternative sources of working capital designed specifically for SMEs and business owners.
The South African business was founded by entrepreneurs who understand the difficulty that other entrepreneurs face when trying to grow their business and raise working capital. Due to the painless nature of the loan, most of its clients (80%) use Merchant Capital again.
The Merchant Capital solution is a disruptive way of ensuring that the SME 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
- The franchise market
Franchise owners of Nando’s, Engen, Sorbet and Spur have benefited from Merchant Capital’s solution. Businesses can use the funds for just about anything: to hire more employees, buy new equipment, refurbish their store, buy more stock and even for marketing. In time, Merchant Capital will roll out a suite of niche financial service products that will be attractive to small businesses.
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. Because repayments fluctuate 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 the SME requires to take the next step in its growth and collects the percentage of card sales until the amount is repaid. Once 70% of the cash advance is repaid, the SME automatically qualifies for a re-advance on the same or better terms than the first, allowing the SME to further grow their business. Currently 80% of clients renew with Merchant Capital.
The amount provided to the business is agreed on upfront and it never changes. It can take the SME three months to pay back 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. Clients comment that loan repayments are ‘painless’.
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 operating for 6 – 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 specific considerations into account.
What is needed to apply for Merchant Capital finance
- A completed Merchant Capital application form.
- Business banks statement for the last three months.
- Business registration documents from CIPS.
- ID documents of each directors.
- Business insurance schedule.
- Business lease agreement.
- 13 months of credit card transaction statement or 12 months of bank statements.
- Franchise agreement if applicable.
At DTC we understand the complexities of the various funding agencies and the unique application criteria for each. We have assisted thousands of entrepreneurs through the application process to access funding for businesses, and we can assist you with the same.
Contact us for more information on funding through Merchant Capital.