Verdant Capital raises USD 6.7 million for Retail Capital in South Africa
Retail Capital is the leading and the first Merchant Cash Advance provider in the South African SME market. Retail Capital was incorporated in 2011 in Cape Town and has expanded geographically to Johannesburg and Durban; other cities are served by agents. In 2018, the company acquired First Asset Finance, an asset leasing business to bring an additional diversification into the credit book. The Asset Finance book which is mostly in the medical space has proved to be highly resistant during the covid-19 related lockdowns. The business is evolving into a broader technology- and channel-driven SME lender. As of March 2020, the business has disbursed over ZAR 3 billion (approx. USD 183 million) to date to over 22 000 SMEs.
In South Africa, funding is an important factor that affects the growth (and survival) of any small business. Retail Capital’s offering provides a valuable solution by affording SME owners and managers access to the required capital, which they would otherwise find challenging to obtain from traditional funding channels. Over the covid-19 related lockdown period, which began in March 2020, Retail Capital funded ZAR 300 million (approx. USD 18 million) to 4 800+ SA SMEs, and through paused debits have saved small business owners a whooping ZAR 280 million (approx. USD 17 million). Collection rates have since bounded back to 90% of pre-covid levels by end of August.
Verdant Capital has raised ZAR 110 million (approx. USD 6.7 million) for Retail Capital through a bilaterally settled certificated-note as per the common terms agreement but outside the settlement system of the unlisted note programme.
Retail Capital continues to engage with both new and potential funders for growth funding. A number of impact investors are looking to join this funding round. This funding brings diversification benefits and longer tenor as the business is also supported by shareholders and other investors.
Verdant Capital acted as sole advisor and arranger to Retail Capital.