Fintech SME capital provider, ProfitShare Partners has secured R100 million ($5m) from the SA SME Fund. With this funding, ProfitShare Partners looks to partner with small and medium businesses to help accelerate growth for SMEs.
ProfitShare Partners provides disruptive alternative funding to SMEs which have a contract with a reputable company or government department. This funding allows SMEs to deliver successfully on their orders and contracts which in turn allows them to access a bigger pool of business resulting in exponential growth.
Characterised as a fintech disruptor, ProfitShare Partners has assisted more than a hundred SME’s since conception providing them with the tools to grow their turnover tenfold in less than two years.
In recognising the ProfitShare Partners business model and its positive impact on SME growth, the SA SME Fund provided the R100m in funding to assist in accelerating the growth of the SME market in South Africa.
Ketso Gordhan, Chief Executive Office (CEO) of the SA SME fund explains that their investment into ProfitShare Partners comes at a time where it is dire to the survival of 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. PSP 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,” he said.
Data gathered from an academic conference held by the National Planning Commission on small business as the spine of economic recovery and stimulation indicates that 92% of small businesses are struggling to operate. In addition, researched have estimated than over 50,000 SMMEs will shut down due to the impacts of the pandemic.
Covid-19 has had far-reaching effects on the SME market and the funding secured by ProfitShare Partners is a step towards revitalising this sector.
Andrew Maren, CEO and founder of Profitshare Partners comments on the impact of the R100-million in funding.
“This deal is a great win for SMEs who 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.”
ProfitShare Partners business model
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 FinTech business provides the capital and business support needed for the SME to deliver on their 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.
SMEs in supply and delivery who 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.