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Mobile app and card-reader startup iKhokha on Monday announced that merchants using its devices and platforms can now get cash advances to help grow their businesses.
According to a press release sent to Ventureburn, the new feature is designed to assist small business owners who can’t access capital through more traditional means.
“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,” says 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% of SME finance applications are not matched by banks in SA 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”.
To test interest in the product, iKhokha offered only 250 of its merchants a cash advance and says it was surprised by the demand. They disbursed more than R500 000 worth of cash advances within the first week with an average deal size of R19 000 per advance.
iKhokha says it tried to make applying for a cash advance as simple as possible. The merchant opens the iKhokha app, reviews his custom cash advance offer, selects how much he requires and selects the targeted repayment period and agrees to the transparent fixed fees. Once accepted, the money is deposited into his account within 24 hours.
Given that iKhokha already knows the merchant’s trading history, it says, no additional paperwork or security is required.
Once the cash advance has been approved iKhokha automatically deducts a fixed percentage on each processed card transaction, so the merchant’s repayments are linked to his 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. On the flip side, if business is slow, cash flow is not crippled.
All active iKhokha business owners that have been trading for more than three months will be eligible for a cash advance and it is customised based on each merchant’s trading history.
Feature image via iKhokha.