Yoco seals R1.6 billion deal

Yoco Technologies secured a $100 million (R1.6 billion) credit facility from Victory Park Capital Advisors to help the South African digital-commerce company, backed by private equity giant TPG, support its network of merchants.

The firm that provides card terminals to small businesses will use the money to finance and provide cash advances to its customers, CEO Carsten Höltkemeyer said in an interview. 

The transaction with Victory Park, which manages about $3.6 billion in assets and has invested more than $12 billion across 260 investments since 2007, marks Yoco’s first foray into the debt market.

It has disbursed R6.5 billion to merchants through partners. 

“The deal will for the first time give Yoco direct control over the financing needs for our merchants at scale and in-house,” Höltkemeyer said.

“Advances will range from 2,000 rand to 1.5 million rand, with merchants using the money to fund things like hiring more staff, buying stock, equipment upgrades or opening new branches.”

The deal with Chicago-based Victory Park signals that global investors still have an appetite for big bets on Africa’s rapidly scaling fintech economy.

Yoco previously raised more than $150 million in equity from large global backers including TPG and Dragoneer Investment.

In recent years, private-debt facilities have become more important sources of funding for Africa’s increasingly maturing technology companies.

Small businesses in Africa’s biggest economy face a funding gap of about R350 billion, according to the Access to Finance report produced by aggregator Finfind.

The companies struggle to secure financing from traditional banks, and providing access to working capital at scale will stimulate growth in the sector, said Höltkemeyer.

Yoco began operating in 2015 and has expanded its offering from selling affordable point-of-sale devices to providing a payments platform that now runs on an artificial intelligence operating system, said Höltkemeyer.

Merchants who use the payment devices have access to the Yoco Capital service and can be pre-approved for advances based on their live sales data, he said.

Funding to a merchant’s account is instantaneous, with repayments done through automatic deductions from businesses’ daily sales, said Höltkemeyer.

The Cape Town-based startup now processes payments for 200,000 merchants, serving 30 million consumers a year, he said. To date, Yoco has processed more than $15 billion in payments, said Höltkemeyer.