Where To Get Small Business Loans In South Africa

South Africa has a pretty unique economy with a mix of formal and informal businesses, with massive corporates running specific sectors while others are dominated by SME's and informal businesses. It's reported that South Africa is home to some 2.5 million small to medium-sized companies all looking to grow their presence. Still, in many cases, the lack of liquidity keeps them trucking along and inhibits growth.

In South Africa access to capital for small businesses is a tough task, many fall between the cracks or cannot meet the requirements for traditional finance and this high barrier to entry stops SME's from growing and providing improved competition in the market.

Lack of interest from retail banks

Traditionally a small business in South Africa would approach a retail bank for a business loan. However, the range of credit products available from these institutions are largely usually inflexible, and applications are more complicated, pushing away more businesses than they help.

Banks in South Africa have been more focused on consumers rather than small businesses as businesses since its seen as a safer bet. They've focused on funding vehicle and home loans for a steady income and would much rather keep their bottom line growing then assist growth and innovation in the economy. This short-sighted approach has seen an overinvestment in property and inflated prices of land and real estate.

Since business loan agreements are homogenous and therefore more complicated to service, the ability for banks to be agile enough to suit businesses has left a massive funding gap that SME's cannot seem to close.

But what about private capital?

In South Africa, there has been much talk about venture capital and angel investors funding startups, but this is primarily suited to the technology sector.

Venture capital and angel investors are no interested in SME's as they're looking to drive return on investment and only a particular niche of business. Companies that can scale and either exit in future funding rounds or each a valuation where they feel comfortable diluting their equity. The search for yield over shorter periods disqualifies a wide range of businesses from being prospects for venture or angel investment.

Alternative finance solutions

Considering that a large number of SMEs are falling outside these funding requirements, we've seen a growth in private alternative funding solutions for businesses spring up to try and bridge the gap. If you feel that retail banks wouldn't suit your funding needs or short term capital expenditures, then these finTech companies may be the partner you're looking for to help you take advantage of your businesses full potential and grab more market share over time.

1. Fincheck

About them:

Fincheck partners with South African banks, lenders and insurers offering a real-time and independent means of comparing and applying for finance across 30 lenders.

Who they serve:

Business owners seeking finance in South Africa.

Amount:

R20,000 – R72 million

Visit their site

2. Lulalend

About them:

Delivers business funding using proprietary scoring technology, which offers an instant funding decision on applications.

Who they serve:

South African businesses across all industries trading for more than one year with annual revenue of R500,000+.

Amount:

R20,000 – R1 million

Visit their site

3. Fundrr

About them:

Developed an automated credit model that analyses close to 100 data points to provide a complete picture of growth possibilities. This produces a Fundrr score used to rate your loan application.

Who they serve:

At least a 12-month track record, with a minimum of R1 million turnover or asset value.

Amount:

R20,000 – R500,000.

Visit their site

4. Merchant Capital

About them:

Offers merchant cash advances for retail businesses with flexible repayment terms.

Who they serve:

A retail business owner with an average of over R30,000 in credit and debit card sales and has been in operation for more than one year.

Amount:

Qualification of up to 100% of a business’ average monthly credit and debit card turnover.

Visit their site

5. iKhoka

About them:

Offers card machines that accept debit and credit cards. After three months of trading, offers you a custom cash advance offer.

Who they serve:

Check your offer in the iKhokha app and decide how much you need. The more you process through iKhokha, the more significant the amount you qualify for as a loan.

Amount:

Depends on the turnover of your business over three months.

Visit their site

6. Zande Africa

About them:

Provides trade and merchant finance to spaza shops.

Who they serve:

You are looking to procure stock for your spaza shop. Spaza credit is a form of inventory finance that will assist you.

Amount:

Lines of credit depend on the turnover of the spaza.

Visit their site

7. Bright on Capital

About them:

Bright On Capital is an online peer-to-peer lender that provides affordable working capital funding to emerging small supplier businesses with sustainable growth prospects.

Who they serve:

Small companies that have been trading for at least 12 months, who are supplying one or more corporates or credit-worthy public entities, and are expecting to generate at least R1 million in annual revenues.

Amount:

Small businesses can access revolving working capital facilities of up to R1 million to execute on procurement opportunities sourced from these large qualifying entities.

Visit their site

8. ProfitShare Partners

About them:

ProfitShare Partners provides disruptive short-term capital solutions and transactional support to SMEs with valid contracts or purchase orders from large reputable organisations.

Who they serve:

SMEs with no track record, financial history or security with low performance, short-term agreements (up to 365 days) or purchase orders with large reputable organisations.

Amount:

Minimum of R250,000 up to R5 million per transaction.

Visit their site

9. Express Business Capital

About them: 

EBC is based on a simple premise that the longer you can trade, the more you’ll generate turnover. They are willing to support SME's through regular small transactions, or less frequent, larger sales, as long as your business has shown that it has a reliable income stream.

Who they serve:

SMEs with a history of 6 months of trading or more and have regular transactions and a monthly turnover of R150 000.

Amount: 

Minimum of R50,000 up to R2 million per transaction. 

Visit their site

10. Retail Capital

About them: 

Retail Capital has been running since 2011 and aims to partners with South African SME's through innovative funding solutions, where flexible repayment options are determined by the businesses performance.

Who they serve:

SMEs with a trading history of more than 3 months and a card turnover of R15 000 or more

Amount: 

They provide several flexible products based on future revenue or cash flow based on asset purchases

Visit their site

Finding funds for your local business

Have you found it tough securing funding for a deal or long term funding at a rate that works for your flow of capital? Have you worked with any of these funding providers or know of any providers that should be added to the list? Let us know in the comments below

Contact us

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Are you looking to promote your business?

South African small business owners can create your free business listing on nichemarket. The more information you provide about your business, the easier it will be for your customers to find you online. Registering with nichemarket is easy; all you will need to do is head over to our sign up form and follow the instructions.

If you require a more detailed guide on how to create your profile or your listing, then we highly recommend you check out the following articles. 

• How to create a nichemarketer profile 
• How to create a nichemarket business listing 

Recommended reading

If you enjoyed this post and have a little extra time to dive deeper down the rabbit hole, why not check out the following posts on small business tips

• How To Register A Small Business In South Africa
• 5 Tips for Funding Your Small Business
• 10 Retail Market Secrets That Every Small Business Should Know
• Don't Ignore These 4 Digital Marketing Tips for Small Businesses
• 14 Ways To Leverage Facebook As A Small Business
• 7 Outside the Box, Ways To Market Your Small Business
• 8 Ways Small Businesses Waste Money Marketing

Tags: Small Business , Funding