Funding Growth

Funding Growth


The big idea

According to Dov Girnun, one third of SME owners are declined working capital loans.

“There are hundreds of thousands of credit card terminals and SME merchants in South Africa, so we knew there was a market for a product that could quickly and efficiently grant working capital cash advances without requiring personal surety or collateral.

“SMEs, particularly small retailers and restaurants, can use working capital to fuel growth, and that’s the market we wanted to tap.”

The model

Girnun extensively researched the market in the US and has partnered with the US’s leader in this field, headquartered in New York.

As a result, and thanks to a small but focused local team, Merchant Capital’s current turnaround time for funding cash advances is 24 to 48 hours. These are repaid according to future business turnover.

“Our clients need to accept credit and debit cards because our product is repaid through a small percentage of each future card transaction.”

In other words, from each future card transaction a small percentage goes to Merchant Capital and the balance back to the business.

This means that during busier times more of the cash advance is repaid, and in quiet seasons less is paid off – so business owners don’t need to worry about onerous repayments during quieter months.

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The nuts and bolts

Merchant Capital evaluates the last six to 12 months of a business’s transactions, using the average to forecast similar future turnover and evaluating the cash advance the business qualifies for.

“In essence, we are acknowledging that future card sales are an asset of the business, and we are simply unlocking that future asset today.

“It’s a bit like factoring in that we discount a percentage of future card revenue and advance the cash today, but the full 100% is repaid with no fixed repayment term. There is no actual invoice or surety, so we are taking a risk.”


Because it’s an unsecured deal, it’s in Merchant Capital’s best interest for its clients to do well.

This means manageable cash advances are granted so that each client can afford the product, and repayments are specifically structured to not affect profitability.

“We don’t want their businesses to suffer  because we have no recourse to get our money back. We’re not in a queue of creditors. And because we are collecting a fixed percent of future turnover we partner up with the owners in the true sense of the word by sharing in the pain of their slower months by collecting less.

“Working capital allows business owners to buy more stock, try out a new product, or add that summer deck they’ve been wanting to their restaurant.

“Using the restaurant as an example, during the summer months this means an increase in turnover, but when winter comes, the section is closed for the season and turnover decreases, so too do the repayments.”

The team

While Girnun is the founder and owner of Merchant Capital, his investors do have an equity stake, as does his management team.

“I have made a pool of equity available for my senior management team.

Through my time at an equity investment firm I have seen how sharing the success of a business can really incentivise partners to view the business and its growth as their own, with excellent overall results.

The idea isn’t for me to have more of a smaller pie, but share a larger pie instead.

We have an excellent product behind us, but it’s our proprietary system and intellectual property that is choosing clients, evaluating their credit histories, turnover and growth potential, choosing what cash advance they qualify for, and we’re doing it within two days.”

Future growth

Launched in January 2013, Merchant Capital currently enjoys a high approval rate, with 90% of all applications coming through the doors granted a cash advance.

Girnun is currently in talks with local and global developmental banks to extend Merchant Capital’s scope.

“We’ve completed our proof of concept, and are seeing a lot of interest from these funders because the product suits their mandates of job creation, fueling SME growth and developing an African economy.”

The entrepreneur

Dov Girnun is a finance guy. He’s been a member of private equity firm Tau Capital’s team since 2006, and co-founded an online consumer lending business in the UK two years ago.

The business is run by a best in class UK management team, including Girnun’s younger brother, but the experience has given him valuable insight into the sophisticated technology available that allows consumers to receive approval for funding within minutes.

It planted a seed that Girnun has now seen to fruition with Merchant Capital.

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