South African fintech Yoco has landed a $100 million debt facility, provided by Victory Park Capital, an American investment firm. The funds will back expansion of its merchant advance product for small businesses, and will also give the company firmer control over the lending that flows through its payment platform.
Since 2018, Yoco Capital, the firm's lending division, has disbursed over R6.5 billion ($395 million) to more than 40,000 merchants, each time working alongside specialist lenders. Yoco should gain firmer control over how merchant loans are priced and how risk is handled as the business grows, thanks to the new facility.
Yoco's Operations
Yoco is betting that information generated whenever merchants use its card terminals and online payment products will let it assess firms that traditional banks and lenders often find hard to appraise. Should that data advantage prove real, the company could convert its payment links with over 200,000 enterprises into a larger merchant-lending business, while also finding out whether the model stays profitable as it grows.
Small businesses that already use the Yoco platform can get working-capital advances through Yoco Capital, which relies on data to decide who is eligible. There is no application process. Instead, each merchant is evaluated on up-to-the-minute figures drawn from live sales data, covering both card-present and online payments, and anyone who meets the criteria will see offers waiting for them inside the app. The sums on offer start at R2,000 ($122) and climb to R1.5 million ($91,185), and the merchant does not have to put up any security.
Each merchant's daily sales are the source of the repayments, which are deducted automatically, and there are no set monthly instalments. In principle, the amount a trader hands over moves up and down in step with turnover, though that raises concerns about how merchants manage when earnings fall or their trade becomes erratic.
Carsten Holtkemeyer
Yoco's chief executive, Carsten Holtkemeyer, explained the thinking behind the move in a statement released on Monday: "We have spent a decade building an operating system that runs a merchant’s whole business, payments, point of sale, and now the decisions in between. Financing was the one layer we didn’t fully control. This facility changes that,"
Yoco describes the deal as among the largest purpose-built facilities of its kind for merchant cash advances on the continent, and says it now holds a large-scale grip on the lending side of its business for the first occasion. It also claims that none of its lending cohorts has lost money since it began lending in 2018, a record it says survived the Covid-19 crisis. The announcement, however, offered no cohort-level performance data, no figures on defaults and no write-off numbers.
The company's approach rests on viewing a small business's financial health differently. Whereas a lone statement from a bank or a report from a credit bureau gives only one snapshot, records of payments can reveal how sales patterns develop over time. Yoco says this visibility lets it fit the funding it offers to the way a merchant has traded and what the business needs.
Yoco says merchants typically put the advances towards stocking up before their peak trading seasons, taking on staff, replacing or upgrading equipment, or opening further outlets. The firm intends to offer Yoco Capital to a bigger share of its base of over 200,000 merchants in South Africa, spanning the retail, hospitality and service sectors.
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Small businesses still find it hard to raise money. In South Africa, the gap in funding for such firms is put at around R350 billion ($21.3 billion) by the 2025 Finfind and African Bank SA MSME Access to Finance Report. The report also shows a lopsided split of bank credit: large corporations take 51% of it, while smaller firms of modest and middling size (SMEs) are left with 13%.
Jason Brown, Senior Partner at Victory Park
The deal draws on Victory Park Capital's expertise in non-bank lending and in lending secured against assets. According to the firm itself, it has put more than $12 billion into 260 transactions since 2007. Jason Brown, a senior partner at Victory Park, said Yoco had shown a history of supporting small, independent businesses.
“We’re supportive of Yoco’s mission to expand access to flexible financing solutions for South African entrepreneurs,” Brown said.
Yoco sees the facility as only one element of a broader drive to become a single destination for managing small, independent businesses, bringing together card acceptance, till software and lending. The firm has widened what it offers, acquired the software company Dyner, and says it is building a platform driven by AI. It also says that merchants now pay R250 million ($15.20 million) less in fees each year.
The question facing Yoco now is whether it can grow its cash advances without losing the rigour that underpins its approach. What will count most to merchants is straightforward: that the money reaches them at the moment they need it, so they can stay open and keep customers paying at the till.
Editor's note: this piece has been corrected so that it makes plain that the $100 million line of credit belonging to Yoco is intended to back its merchant cash advance business, and not its broader lending to merchants.
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