SA fintech startup iKhokha launches merchant cash advance service

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South African fintech startup iKhokha, which provides a mobile app and card machine to more than 2,500 small and medium formal and informal businesses in the country, has widened its offering to include merchant cash advance.

iKhokha, which has been has been funded since its inception by Capital Eye Investments, has partnered Retail Capital as financing partner for the cash advance service.

The startup tested interest in the product by offering cash advances to 250 merchants, which saw it disburse more than ZAR500,000 (US$33,500) worth of cash advances within the first week with an average deal size of ZAR19,000 (US$1,275) per advance.

“We have always wanted to help solve the real challenges which face South African entrepreneurs and we know from working closely with them that their number one issue is access to capital,” said iKhokha managing director Matt Putman.

“The majority of our merchants do not qualify for a formal bank loan as they are seen as too risky by traditional institutions, in fact our partner data shows up to 80 per cent of SME finance applications are not matched by banks in South Africa and yet these businesses are healthy and in need of finance to grow. It has serious repercussions for our economy if they don’t get the support they need. That really worries us, hence the development of cash advance.”

Applying for an iKhokha cash advance is simplified to three online mobile clicks. The merchant opens the iKhokha app, reviews their custom cash advance offer, selects how much they require and selects the targeted repayment period and agrees to the fixed fees. Once accepted, the money is deposited into an account within 24 hours.

As iKhokha already knows the merchant’s trading history, no additional paperwork or security is required. iKhokha automatically deducts a fixed percentage on each processed card transaction, so the merchant’s repayments are linked to their monthly business performance.

The cash advance capital cost is capped upfront, at a percentage of the capital amount taken, and does not increase irrespective of how long it takes to pay back. The better the business does, the quicker the amount is paid off.

The new service is part of iKhokha’s evolution into more than just a provider of mobile card machines and payment acceptance for SMEs. The goal is to position the startup as a broader financial services provider for grassroots entrepreneurs in South Africa, such as spaza shops, tavern owners, tradesmen, salon owners, independent retailers and market vendors.

“These grassroots businesses should stimulate real growth and employment in South Africa, yet the business owners struggle to access the appropriate services for their growth needs,” said Putman. “We want to fill that gap and assist them in their journey to full digital and financial inclusion.”

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Passionate about the vibrant tech startups scene in Africa, Tom can usually be found sniffing out the continent's most exciting new companies and entrepreneurs, funding rounds and any other developments within the growing ecosystem.

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