Re­tail lender tar­gets small busi­nesses

CityPress - - Business - LESETJA MALOPE lesetja.malope@city­

“Turnover is van­ity. Profit is san­ity. But cash flow is re­al­ity.” This is the catch phrase that ap­pears on the web­site of six-year-old fi­nan­cial ser­vices provider Re­tail Cap­i­tal.

The com­pany, which pro­vides un­se­cured fund­ing to thou­sands of busi­nesses, may be well on its way to be­com­ing one of the big­gest al­ter­na­tive fi­nance houses ser­vic­ing small busi­nesses across the coun­try.

Re­tail Cap­i­tal CEO Karl Westvig told City Press that the com­pany had pen­e­trated the small busi­ness mar­ket as an al­ter­na­tive to tra­di­tional bank fi­nance.

Based in Cape Town, Re­tail Cap­i­tal is owned by a con­sor­tium of pri­vate in­vestors and loans money to re­tail­ers who lack as­sets that would al­low them to se­cure fund­ing from the banks.

Westvig said Re­tail Cap­i­tal was first to im­port the model from the UK and US, and that it had proved ben­e­fi­cial in light of the fund­ing chal­lenges faced by lo­cal busi­nesses.

“We pro­vide un­se­cured loans, but we se­cure them against fu­ture turnover,” he said.

Ac­cord­ing to Westvig, the model is riskier than tra­di­tional bank­ing meth­ods. Be­cause the re­pay­ment is a fixed turnover-linked per­cent­age, the com­pany stands to ben­e­fit only if the turnover is high.

Westvig said given that the per­cent­age was fixed, if the client’s busi­ness did not do well, this did not mean more money would be re­paid but rather, that it would take more time to be re­paid. So, more turnover equals more re­pay­ment; less turnover equals less re­pay­ment.

“Any re­tailer with a debit and credit card fa­cil­ity can be our client. We only look at the past six months’ turnover,” he said.

Westvig said the com­pany also used its con­sul­tants – who to­tal 30 coun­try­wide – to visit the busi­nesses, in­stead of hav­ing clients come to a branch, as this en­sured more per­sonal in­ter­ac­tion.

Hence, the com­pany does not have branches but op­er­ates via its con­sul­tants and from its of­fices in Dur­ban, Cape Town and Jo­han­nes­burg. Cur­rently, it has an ac­tive cus­tomer base of about 1 000.

Westvig said Re­tail Cap­i­tal pro­vided work­ing cap­i­tal to small busi­nesses mainly via debit and credit cards. Since in­cor­po­rat­ing the sys­tem, the com­pany has ad­vanced close on R1 bil­lion to more than 3 000 busi­nesses, in­clud­ing restau­rants, re­tail­ers, beauty spas and med­i­cal prac­ti­tion­ers.

“Our cash ad­vance sys­tem of­fers a cer­tain el­e­ment of pro­tec­tion for the fund­ing provider and the re­cip­i­ent, en­sur­ing our sus­tain­abil­ity and that of small busi­nesses, many of whom have been hob­bled by huge lev­els of debt from un­sus­tain­able re­pay­ment re­quire­ments.”

Its com­peti­tors in­clude Mer­chant Cap­i­tal and Cash Flow Cap­i­tal. Re­tail Cap­i­tal started with staff from the fi­nan­cial sec­tor. Self-funded re­sources were used to sup­ple­ment the monies bor­rowed from as­set man­agers.

Karl Westvig

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