Summit Private Equity Fund I acquires a controlling interest in Custom Capital Finance Holdings, backing business growth for SMMEs, with niche products for black-owned and female-run businesses.

Summit Africa (“Summit”) recently concluded a transaction to acquire a 51% shareholding in Custom Capital Finance Holdings (“CCF”), an alternative lender providing finance to small, medium & micro-enterprises (“SMMEs”). CCF’s rental finance business acquires on behalf of and rents to SMMEs, information technology, telecommunication, security, medical, alternative energy, and other equipment/assets, enabling SMMEs to secure business-critical equipment. In addition, CCF assists companies with cash flow certainty through its invoice discounting product offering, providing short-term financing (30-90 days) to clients against invoices from large and credible blue-chip off-takers. Since its inception in 2018, CCF has experienced exponential growth due to strong market demand.

SMMEs are a critical contributor to economic development. According to the IFC SMMEs contribute approximately 34% of South Africa’s GDP and employ between 50 and 60 per cent of South Africa’s workforce.

However, most SMMEs are self-funded, with as little as only 2% of SMMEs able to secure bank financing. Furthermore, a 2018 Finfind study reported that the SMME funding gap in South Africa stands between R86 billion and R346 billion - a gap that has widened further post-Covid. Alternative lenders like CCF fill this critical finance gap for this “unseen sector” by providing high-growth entrepreneurial businesses with specialised funding. The funding is agile, off-balance sheet and responds to businesses’ specific growth needs linked to their cash flow and risk profiles.

The conclusion of the Summit transaction provides CCF with the needed equity to secure additional debt financing through an R2 billion Domestic Medium Term Note Programme (“Programme”), which capacitates the further growth of their rental finance and invoice discounting business. Rand Merchant Bank has been appointed the lead bookrunner arranger for the Programme.

Tomi Amosun – Managing Partner of Summit, says, “We are very pleased to conclude this partnership with CCF as it looks to scale its offering to the underserved SMME sector. The investment is the 7th investment for the Summit Private Equity Fund I and affirms Summit and our institutional partner investors’ commitment to achieving our Social Impact objectives, including Decent Work and Economic Growth (UN Sustainable Development Goal 8); financial inclusion for underserved groups (including SMMEs); and job creation, through the allocation of capital into fast-growing companies in financial services and other carefully selected sectors.”

Chris du Toit, Co-Founder and Co-Managing Director of CCF, had the following to say about the conclusion of the transaction: “The transaction with Summit Africa saw the coming together of two likeminded teams with an aligned core value of unlocking funding to a SMME market requiring capital. The vision of enabling entrepreneurs to grow their businesses, thereby creating jobs and economic growth, is a mutual passion shared by both Custom Capital Finance and Summit Africa. We believe that the transaction, together with RMB as lead debt arranger, positions Custom Capital Finance to become one of South Africa’s leading alternative lenders.”

“The establishment of the CCF Programme alongside Custom Capital Finance and Summit Africa truly speaks to RMB’s commitment to finding innovative growth solutions for our clients. With the founders of Custom Capital Finance having an illustrious history in the rental finance business and Summit Africa’s deep commitment to partnering not only with its investee companies but its commitment to impact and sustainability, the transaction was a natural one for RMB to partner on. The RMB Debt Capital Markets team has a deep passion for enabling the economy, and this passion goes further than just large corporates – the enablement simply must trickle down to the SMME market, which is the lifeblood of the South African economy”, say Nick Tunnicliffe, a lead transactor in RMB’s Debt Capital Markets Team.