Zama Clothing — Funding Structure & Requirements
The proposed capital structure optimises the cost of capital while maintaining adequate equity buffers for lender comfort:
Section 12 · Business Plan
Funding Structure & Requirements
The proposed capital structure optimises the cost of capital while maintaining adequate equity buffers for lender comfort:
A 60% equity (ZAR 24 million) and 40% debt (ZAR 16 million) capital structure, on a 3.8-year payback.
12.1 Capital Structure
The proposed capital structure optimises the cost of capital while maintaining adequate equity buffers for lender comfort:
| Source | Amount (ZAR) | % of Total | Terms |
|---|---|---|---|
| Founder Equity | 10,000,000 | 24.7% | Ordinary Shares |
| Strategic Equity Partner | 14,000,000 | 34.6% | Ordinary Shares |
| Term Loan (DFI/Bank) | 12,000,000 | 29.6% | 5yr, Prime+2% |
| Asset Finance | 4,500,000 | 11.1% | 5yr instalment |
| Total Funding | 40,500,000 | 100% |
12.2 Debt Service Schedule
| Debt Service (ZAR '000) | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Opening Loan Balance | 16,000 | 12,800 | 9,600 | 6,400 | 3,200 |
| Principal Repayment | (3,200) | (3,200) | (3,200) | (3,200) | (3,200) |
| Interest Payment | (2,200) | (1,980) | (1,680) | (1,300) | (840) |
| Total Debt Service | (5,400) | (5,180) | (4,880) | (4,500) | (4,040) |
| Closing Balance | 12,800 | 9,600 | 6,400 | 3,200 | 0 |
| DSCR (Cash Available/Debt Service) | 0.16x | 1.09x | 2.33x | 4.04x | 5.01x |
The debt service coverage ratio (DSCR) improves rapidly from Year 2 onwards, exceeding the typical lender covenant of 1.3x by Year 2 and reaching comfortable levels of 4.0x+ by Year 4. Year 1 DSCR reflects the ramp-up period covered by the working capital reserve.
12.3 Investor Returns & Exit Strategy
Equity investors will benefit from capital appreciation driven by revenue growth and margin expansion. The terminal valuation at Year 5 using a conservative 6x EBITDA multiple yields an enterprise value of approximately R299 million, representing a 3.5x equity multiple on the R24 million equity investment. Potential exit pathways include:
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Trade Sale: Acquisition by a larger apparel manufacturer or retailer seeking vertical integration (most likely within 5–7 years).
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Private Equity Buyout: Secondary sale to a PE fund seeking established manufacturing assets with proven cash flows.
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Management Buyout: Structured acquisition by the management team funded through retained earnings and new debt.
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IPO: Listing on the JSE AltX or main board as a longer-term (7–10 year) option contingent on achieving sufficient scale.
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