For thousands of small businesses in South Africa, access to finance remains a barrier to expansion, even when they generate regular sales. Yoco is seeking to address that problem by turning the payment activity of its merchant network into a gateway for business funding.

The Cape Town-based fintech has secured R1.6 billion ($97.42 million) from US investment firm Victory Park Capital Advisors, giving it additional resources to finance businesses using its payments platform. The facility marks a shift in how the company funds merchant advances, moving beyond its previous reliance on financing partners.

The opportunity is substantial. South African small businesses face an estimated R350 billion ($21.31 billion) funding gap, according to the Access to Finance report by financial services aggregator Finfind. Many struggle to obtain working capital from conventional banks, limiting their ability to purchase stock, employ workers and invest in expansion.

From payment terminals to business capital

Yoco’s financing model is built around information it already collects through merchant transactions. Businesses using its payment devices can qualify for pre-approved advances through Yoco Capital, with eligibility determined by their live sales data.

Approved merchants receive funding directly into their accounts, while repayments are automatically deducted from daily sales. This connects repayment obligations to actual business transactions rather than relying solely on conventional loan structures.

The new facility will allow Yoco to offer advances ranging from R2,000 ($121.76) to R1.5 million (approximately $91,319). The money can support inventory purchases, additional recruitment, equipment upgrades and the opening of new outlets. Chief Executive Officer Carsten Höltkemeyer said the agreement would give the company direct control over merchant financing at scale.

Yoco has already distributed R6.5 billion ($395.76 million) to businesses through financing partners. The latest arrangement provides a new funding source as it seeks to expand its lending activities.

International capital enters a new phase

For Victory Park Capital, the agreement provides exposure to Yoco’s merchant financing operations. The Chicago-based investment firm manages approximately $3.6 billion in assets and has deployed more than $12 billion across 260 investments since 2007.

The transaction also marks Yoco’s first entry into the debt market. The company previously raised more than $150 million in equity from investors including TPG and Dragoneer Investment Group.

The distinction is important for African fintech companies seeking to diversify their funding sources. Debt facilities can provide capital for specific financial products without requiring companies to depend exclusively on additional equity investment. Yoco’s ability to expand merchant lending will depend on the performance of its financing portfolio and the continued activity of businesses using its payment services.

A merchant network of 200,000 businesses

Since launching in 2015, Yoco has expanded from selling affordable point-of-sale terminals into a broader digital payments business with an artificial intelligence-powered operating system. Its platform now processes payments for approximately 200,000 merchants and serves 30 million consumers annually. The company has processed more than $15 billion in transactions.

That existing network provides the foundation for its financing strategy: rather than building an entirely separate customer base for lending, Yoco can use the payment relationships it already maintains to identify businesses seeking capital.

The $97.42 million facility therefore represents more than a new source of funding. It gives Yoco greater capacity to develop lending as an extension of its payments business.