Fintech SME capital provider ProfitShare Partners has secured R100 million from the SA SME Fund.
In a statement, the fintech firm says the money will allow ProfitShare to partner with more small and medium businesses to provide much-needed capital to catalyse growth.
ProfitShare is a fintech business that provides disruptive short-term capital solutions (from R250 000 to R5 million) and transactional support to SMEs that have no access to funding, no security, financials or track record but have a contract or purchase order with a reputable company or government department.
The SA SME Fund is a private sector-led initiative born out of the “CEO Initiative”, a partnership between the South African government and local CEOs to stimulate the economy and create jobs. The fund has R1.2 billion of investable capital, which it invests via partnerships with fund managers.
ProfitShare notes that in the midst of the COVID-19 crisis, SMEs have been severely affected – even after the easing of lockdown restrictions over the past few weeks.
It points out that as much as 92% of small businesses are struggling to operate and researchers have estimated that over 50 000 SMMEs will not survive the pandemic.
In response to the call for private and public sector organisations to contribute to SME growth and development, ProfitShare says it remains committed to enabling small businesses with its capital solutions.
The firm financially partners on transactions with SMEs to deliver successfully on their orders and contracts with reputable organisations, allowing them to access bigger business and grow exponentially in short periods of time.
Since introducing its business model to the market, the fintech disruptor says it has assisted more than a hundred SMEs and helped numerous SMEs grow their turnover 10-fold in less than two years.
It adds that the SA SME Fund, which invests in intermediaries that provide debt and equity instruments to SMEs, has recognised the potential that ProfitShare’s business model offers to SMEs for high-impact growth, and has provided the company with R100 million that will assist in catalysing more growth in the SME market.
“The availability of funding and access to working capital has always been a challenge for SMEs. This has been exacerbated by the country’s economic crisis which has been deepened by the pandemic,” says Ketso Gordhan, CEO of the SA SME Fund.
“ProfitShare Partners will provide SMEs with an alternative funding model to act as a catalyst for their survival and growth. The SA SME Fund is extremely pleased to be announcing this investment; it could not be more timeous.”
“This deal is a great win for SMEs that can’t access traditional funding. This capital helps ProfitShare Partners financially partner with hundreds of SMEs to catalyse their businesses to becoming bigger and more sustainable, enabling them to attract traditional funding in the future,” says Andrew Maren, CEO and founder of ProfitShare Partners.
The ProfitShare Partners business model is best described as a hybrid between venture capital and private equity; however, it does not involve taking up shares in its clients’ businesses but rather, partners with them principally on the specific transaction, the company explains.
It notes the fintech firm provides the capital and business support needed for the SME to deliver on its contract.
“Our model is designed to give SMEs a boost. As opposed to providing capital as a form of a loan, we share in the profit and assist our clients in achieving financial sustainability to the point where they are either in a position to qualify for traditional finance or they no longer require finance,” Maren continues.
He says SMEs in supply and delivery that have an order but cannot access the capital needed to deliver, either because they do not qualify or because they do not have the necessary track record, financial history or paperwork, now have improved chances of gaining access to business and delivering more efficiently on their contracts.
“This investment also shows the confidence that funders now have towards our disruptive type of business model, which has demonstrated the real impact we’ve had with our existing SME clients,” Maren concludes.
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