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.

They have expertise in and provide working capital solutions for businesses in the following sectors:

  1. Restaurants and hospitality
  2. Fuel retail
  3. Health and beauty
  4. Fashion retail
  5. Automotive retailers
  6. Building, office and hardware
  7. Electronics and furniture retail
  8. Jewellers
  9. Supermarkets
  10. 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.


Capricorn Capital Group invested in Merchant Capital in 2013. Capricorn Capital Group is associated with Yellowwoods, which includes Hollard Insurance, Clientèle and Nando’s and Direct Axis.

In 2015, Rand Merchant Investment Holdings acquired a 25.1% stake in the business. RMI Holdings’ investments include MMI, Discovery Holdings and OUTsurance.

Why the need for working capital finance?

Cash flow is critical to business growth. It can mean the difference between the success and failure of a business. But small and medium-sized enterprises (SMEs) often don’t meet the requirements of a traditional loan, especially in the early stages. In fact, a third of small businesses are turned down when they apply at traditional financial institutions.

SMEs in SA are seen as critical to grow the economy, yet business owners cite financing as one of the greatest challenges of growing their businesses.

There are 2.8 million SMEs in South Africa, of which a million are formally registered.  The latest Finscope study indicates that 40% of that million has access to finance, which leaves 600 000 formally registered SMEs looking for finance. They typically borrow around R100 000, which means there is a R60-billion funding gap. Merchant Capital was launched to capitalise on that gap.

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.

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.

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’.

How long does it take for merchant cash advance approval?

Merchant Capital offers speedy turnaround for loans. For first loans, the process takes under three days from receipt of the application and all required documents, for current customers, approval can take a few hours. In contrast, banks can take two to three months to evaluate a loan request.

Merchant Capital is able to provide a speedy turnaround due to its proprietary technology which uses an algorithm to evaluate the loan. For instance a restaurant may be evaluated on its Zomato rating as well as landlord and supplier references.

There is human ‘touch’ in each loan. As an ethical loans provider, a partnership model with its merchants means that Merchant Capital has a less than 2% book of bad loans due to detailed affordability checks.  In contrast, banks usually have 7 – 9% book of bad loans.

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?

  1. A completed Merchant Capital application form.
  2. Business banks statement for the last three months.
  3. Business registration documents from CIPS.
  4. ID documents of each directors.
  5. Business insurance schedule.
  6. Business lease agreement.
  7. 13 months of credit card transaction statement or 12 months of bank statements.
  8. Franchise agreement if applicable.

Reference: Franchise Association of South Africa

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