ProfitShare Partners, a South African startup that provides disruptive alternative funding to SMEs has raised R100 million from SA SME Fund to provide much needed capital to SMEs.
ProfitShare Partners works with SMEs that have a contract with a reputable company or government department to allow them to deliver on that contract.
According to Andrew Maren, CEO and founder of ProfitShare Partners, “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.”
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. According to the colloquium held on 23-24 June 2020 by the National Planning Commission on small business as the spine of economic recovery and stimulation, reports show 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 Partners remains committed to enabling small businesses with its capital solutions.
The R100 million from the SA SME Fund will allow ProfitShare Partners to partner with more small and medium businesses to provide much-needed capital to catalyse growth for SMEs.
ProfitShare Partners 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 has assisted more than a hundred SMEs and helped numerous SMEs grow their turnover tenfold in less than two years.
The SA SME Fund, which invests in intermediaries that provide debt and equity instruments to SMEs, has recognised the potential that ProfitShare Partners’ 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. 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,” said Ketso Gordhan, chief executive officer (CEO) of the SA SME Fund.
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.
“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 concluded.