Standard Bank Provides Specialised SME Lending Solution

Standard Bank has partnered with Merchant Capital to offer an innovative working capital solution for small and medium-sized enterprises (SMEs). This new financing option provides upfront cash advances to SMEs, which are repaid through their incoming point-of-sale receipts.

The financing solution, called Merchant Capital Advance, is aimed at retail SMEs that have a point-of-sale device and at least 12 months of trading history. SMEs can access the funds within 24 hours after submitting the necessary documentation to Merchant Capital, which will handle the underwriting of the cash advances. Repayments will be linked to the SME's monthly point-of-sale transactions, with Merchant Capital taking an agreed percentage of future card sales until the advance is fully repaid.

“We were attracted by Merchant Capital’s proven success in retail cash advances, a financing solution that’s well established in the US and UK but relatively new in South Africa,” said Andrew Wilmot, Head of Merchant Solutions at Standard Bank. “Merchant Capital Advance will enhance our ability to serve business clients by providing a new transactional solution, building on the success we've seen with SnapScan.”

Dov Girnun, founder and CEO of Merchant Capital, called the agreement a “transformational deal” in South Africa’s growing fintech industry. “Standard Bank offers a trusted brand, extensive infrastructure, and deep-rooted client relationships. Merchant Capital brings agility, speed, and innovative products. This collaboration of strengths is likely to become more common in the South African financial services sector as institutions adopt technological innovation to expand their services.”

Founded in 2012, Merchant Capital provides alternative working capital solutions for retail-focused SMEs in South Africa, where a lack of funding often leads to high business failure rates. The Merchant Capital Advance product allows SMEs to access upfront cash, which is repaid through point-of-sale receipts, providing much-needed flexibility for businesses.

Retail cash advance financing is especially useful for businesses with cyclical cash flow challenges. For example, restaurants may see lower customer volumes in winter, but still face fixed costs such as electricity, water, and staffing. Similarly, beauty and hairdressing businesses, which rely on imported products, often need to make large purchases before price hikes, straining their cash flow. Merchant Capital Advance helps businesses like these quickly secure the funds they need, with repayment terms that match their business cycles.

This financing solution is also ideal for the franchise sector, where businesses need to invest in retrofitting every three to five years. With Merchant Capital Advance, SMEs can access funding through a simple online application process without the need to pledge assets.

“According to the National Development Plan, 90% of new jobs by 2030 will come from SMEs,” Wilmot noted. “As a major banker for emerging and established businesses in South Africa, we are committed to providing financing solutions that will help drive this growth.”

South Africa is home to over 2.25 million SMEs, with just under 1.5 million classified as informal, according to the Small Business Development Agency (SEDA). These formal and informal businesses contribute between 52% and 57% of the country’s GDP, based on SEDA’s estimates.

Merchant Capital Advance, in collaboration with Standard Bank, became available to Standard Bank customers on 1 June 2018.