Mobile app and card machine start-up iKhokha has widened its service offering to include cash advance to merchants using its devices and platforms.
The iKhokha device is a mobile app and card machine that allows anyone with a small business to accept debit and credit card payments. The device is plugged into a smartphone and is used by downloading the iKhokha app via iOS and Android app store, thereby making the smartphone a mobile point of sale terminal for transactions.
The start-up, which was developed by Kwazulu-Natal-based technology company Emerge Mobile, has more than 2 500 small and medium, formal and informal business partners in SA who can now apply for the cash advance, according to a statement.
Emerge Mobile says applying for an iKhokha cash advance is simplified into three online mobile clicks: The merchant opens the iKhokha app, reviews his custom cash advance offer, selects how much he requires, selects the targeted repayment period and agrees to the transparent fixed fees. Once accepted, the money is deposited into his account within 24 hours.
iKhokha already knows the merchant's trading history and therefore no additional paperwork or security is required. Funding solutions company Retail Capital is the financing partner for iKhokha, cash advance says the company.
iKhokha MD Matt Putman says after working closely with SMEs his company has observed that their number one issue is access to capital.
"We have always wanted to help solve the real challenges which face South African entrepreneurs. 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 indicates 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," he explains.
If SMEs don't get the support they need, continues Putman, this has serious repercussions for the economy, hence the development of the cash advance service.
"Even for the select few SME businesses that could qualify for a bank loan, a standard loan has a number of limitations in that it's complicated, it also requires exhaustive documentation, the entrepreneur often needs to provide personal security as well as needing to commit to pay off a set amount each month over a fixed time period irrespective of normal fluctuations in his cashflow," he notes.
Explaining the payback options, Putman says 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," he continues.
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.
To test the interest in the product, iKhokha offered only 250 of its merchants a cash advance and was surprised by the demand, Putman points out. They disbursed more than R500 000 worth of cash advances within the first week with an average deal size of R19 000 per advance.
The goal is to position iKhokha as a broader financial services provider for grassroots entrepreneurs in SA such as spaza shops, tavern owners, tradesmen, salon owners, independent retailers, market vendors, he asserts.
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