iKhokha, a South African disruptive fintech startup, has announced the launch of a new product, offering its merchants cash advances.
The product, which will be adminstered by iKhokha’s financing partner, Retail Capital, will help merchants get around the hassles associated with obtaining loans from banks and other similar financial institutions.
To get cash advances from iKhokha, merchants open the iKhokha app, review their custom cash advance offer, select how much they need and select the targeted repayment period and agree to the transparent fixed fees.
Once accepted, the money is deposited into their accounts within 24 hours.
iKhokha automatically deducts a fixed percentage on each processed card transaction, so the merchants’ 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.
If a merchant’s business is doing really well, the loan is paid back quickly. If the reverse is the case – business is slow – cash flow won’t cripple.
“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. 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,” said Matt Putman, iKhokha managing director.
He added, “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.”
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.
Through this offering, iKhoka is hoping to drive merchants to more readily embrace the acceptance of card payments over cash payments in a broad range of industries so that they qualify for a cash advance.
This will be especially beneficial to consumers who are looking to reduce, if not totally eliminate, the risk associated with having cash.
The offering was first tested before official launch. During the testing phase, iKhokha offered only 250 of its merchants a cash advance. The demand was surprising!
The startup disbursed more than R500,000 worth of cash advances within the first week with an average deal size of R19,000 per advance.
Based in Durban, iKhokha currently provides a mobile app and card machine to more than 2500 small and medium formal and informal businesses in South Africa.
Its goal is to transform small businesses through mobile innovation and become the go-to brand for SMEs seeking key financial services in SA.
By offering merchants cash advance, it is on its way to doing just that!