How the SA brothers in their early 20s launched cash-advance fintech after lessons learned in the United States

They were so eager to learn how to run a cash advance business that brothers SA Maxi, 22, and Sebastian Cohen, 24, started a cash advance brokerage company in the United States.

Two years later, the two joined an existing partner, having developed a suitable subscription model that they could deploy elsewhere, and decided to focus on South Africa.

In October last year, the two teamed up with 23-year-old Jonti Strimling to found an SA-based fintech lender. Increase capital (with Maxi Cohen, pictured top right with brother Sebi, left, and Strimling).

The lender’s unsecured loan product competes with Merchant Capital and Retail Capital because it uses data points to make small cash advances to businesses (GroWise average cash advance is 40,000 Rand, repaid in three months).

GroWise Capital founders say they are passionate about starting a business in South Africa

So far, the company has loaned R600,000 through its automated online system in 20 transactions to small businesses such as a vaping retailer, stationery and bakery.

The lender charges borrowers a fee, not interest on the advances. The fee, however, turns out to be the equivalent of around 20% of a cash advance.

Until now, the 600,000 rand came from the capital of the three founders. Sebastian Cohen, who is the startup’s CEO, said the three are looking to take the book to R2million before seeking additional funding in the market.

Born in the United States

Cohen, in a call to Ventureburn last week, declined to say how much he and his brother invested in the U.S. Merchant Advances (MCA) business, which operated as Arieh Capital Solutions. (ACS). However, he stressed that opening a brokerage “is not necessarily capital intensive”.

The two brothers registered the business in Delaware in 2018 and used a remote sales team, most of which operated from New York City.

So why did they go to the United States to start a cash advance business?

“America is the birthplace of cash advances to merchants, so we thought we had to go to zero point where it all started,” Cohen explained.

Over the past two years in business, the two have been able to network and work with key players and operations in the cash advance industry.

They have negotiated deals with companies like Yellowstone, Kalamata Cash Group (formerly Kings Cash Group), Vader Mountain Capital, Everest Funding, among others, Cohen explained.

At least once a month, he or Maxi (or both together) would travel to the United States to check on business there to interact with customers and stakeholders.

“The market was saturated”

“During our time at ACS, we realized that the MCA market was already largely saturated in the United States and was not commercially viable,” he explained.

By this time, he and his brother had identified what he called a “huge opportunity” in starting a direct cash advance company in South Africa, with the idea of ​​later expanding the operations to the rest of the continent.

“So we ceased our activities in the United States to concentrate full time and turn to a South African company. This is when GroWise Capital was born, motivated by financial inclusion and driving growth in the African SME sector, ”he said.

Along the way, the pair also enlisted the help of key mentors and advisers they had worked closely with in the United States and who had been heavily involved in setting up the industry. They also met Strimling, a close school friend and a graduate of Wits Actuarial Science.

Today, the ACA remains operational, but Cohen admitted that it is not the central source of income for any of the current investors.

He said part of the reason he and Maxi left the US lender to focus on South Africa was because the three are “passionate” about starting a business in South Africa. .

And despite ongoing blackouts and failing state-owned enterprises threatening to drag the economy with it, he says all three remain “positive for South Africa.”

Featured image (left to right): Maxi Cohen, Sebi Cohen and Jonti Strimling (provided)

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