Verdant Capital Completes Debt Financing of approx. ZAR 95 million (USD 7.5 Million) in Local Currency for Retail Capital
Verdant Capital has raised approx. ZAR 95 million (USD 7.5 million) equivalent in local currency debt financing for Retail Capital from the leading international specialist investors for the expansion of its loan book. This is the first of Retail Capital’s fund-raising programme with international investors. The company has been receiving funding support from specialist local investors, however the transaction arranged by Verdant Capital diversifies Retail Capital’s funding base and represents a foothold in the international specialist funding market. Retail Capital was founded in 2011 and is headquartered in Cape Town with other offices in Johannesburg and Durban. It is the leading and first Merchant Cash Advance (MCA) provider in the South African SME market. Retail Capital also benefits from franchise and channel partners which act as a multiplier of the company’s direct marketing efforts, including new retail payment channels. As of March 2018, the institution has total assets of ZAR 285 M (approx. USD 24.0 M). In March 2018, Global Credit Ratings gave Retail Capital a long-term national scale credit rating of BB with a positive outlook.
In South Africa, SMEs are critical for the economic and social development of the country’s developing economy as they play a major role in creating jobs, generating income for low income earners, boosting economic growth, social stability and contribute to the development of the private sector. It is estimated that SMEs represent 90% of formal businesses providing employment to approx. 60% of the labour force and contributing approx. 34% of GDP. However, lack of funding support from the South African banks confronts most SMEs in the country and this has been witnessed as a major constraint to economic growth. This highlights the need for ongoing funding support to grow financial institutions focused on these segments. Retail Capital has made advances to over 4 000 individual businesses and has helped create over 1 500 jobs to date.
Retail Capital was instrumental in forming a self-regulatory body, the South African SME Finance Association (“SASFA”), which has published a code of conduct promoting transparent and responsible lending in the unregulated SME finance sector.
Verdant Capital acted as sole financial advisor and sole arranger to Retail Capital with respect to the debt private placement. Retail Capital is the first African MCA to tap the specialist international investors and follows successful transactions for MCAs from India.