8 Alternatives to Business Finance in South Africa

The 8 Best Alternatives to Business Finance in South Africa

Man making calculations - Business Finance in South Africa - getlion

In a recent study by Finfind, there are an estimated 2.5 Million small and medium enterprises in South Africa. One of the most notorious struggles for entrepreneurs over the last few decades has been acquiring the financing required to start and operate their business successfully. SMEs and entrepreneurs have affirmed once more that they are in dire need of business finance in South Africa, which they cannot seem to receive from traditional bank finance resources. Futurist, Brett King, once said: “Either banks remove friction, or someone else will”. This is the reality facing SMEs today, but there is an alternative to the norm.

In this guide, we will discuss some of the downfalls of traditional bank financing, and how these have given rise to innovative alternative business financing options for SMEs.

Every business venture has to start somewhere. Most entrepreneurs, when confronted by the question of funding, will immediately look towards traditional business finance, to help fund their business needs. Here at getlion, we would ask the simple question: “Why look to the old ways, when you have a modern business?” Business finance has fortunately evolved, leaving you, as an entrepreneur, with a new era of business finance available to you.

So what has changed?

Traditional finance – bank loans – is (ironically) some of the hardest funding to secure. Unfortunately, most entrepreneurs only consider this avenue when they require financing for their new business. Thankfully, just like business trends are evolving, so is everything about financing. Funder transformation is crucial to keep up with the times.

In the modern-day fast-paced world of business and e-commerce, one can’t wait weeks-on-end for your financing application to be processed with a bank, followed by issues of credit records, the scalability of the business loan as the business grows, etc. All of these present difficulties for SMEs and may result in the business not reaching its full potential. According to Johan Bosini, a partner at Quona Capital, “South African banks have historically focused on consumers rather than small businesses, as businesses are less homogenous and therefore more complicated to service”.

Man looking at a chart - Business Finance in South Africa - getlion

There is bright light at the end of the South African business funding tunnel however, with the start of a new era in business financing, better known alternative financing. This refers to obtaining financing from additional companies or institutions other than traditional bank loans. Here are our eight choices of alternative financing available to South African SMEs:

1. ProfitShare Partners 

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

They aim to draw SMEs with no track record, financial history, or security with low performance, short-term contracts (up to 1 year), or purchase orders with reputable large organisations. The minimum amount financed is R250 000 and up to R5-million per transaction.

2. Merchant Capital

They offer vendors cash advances for retail businesses with flexible repayment terms. This finance option is aimed at retail business owners with an average of over R30 000 in credit and debit card sales and has been in operation for more than one year. The financing amount may vary based on the average monthly retail credit and debit card turnover of the business.

3. FinFind

They are an innovative matching platform that use data-driven algorithms to link businesses seeking finance with matching funders online. The finance offerings include startup finance, expansion finance, equity finance, cash flow bridging finance, amongst various others. Besides linking SMEs with funders, Finfind also provides supportive finance education information, tackles common obstacles experienced by SMEs seeking finance, and provides access to a funding dictionary to help entrepreneurs understand finance terminology. FinFind’s amount of financing varies immensely, because of the wide reach of funders available on the platform.

4. Yoco Capital

This financing option is one that thousands of merchants right across South Africa have opted for. Offered to eligible merchants, Yoco Capital offers fast and flexible funding for small businesses. Once approved, they deposit your cash advance the very next day. What makes this financing option so appealing is that they pay your cash advance and have a unique repayment system. Merchants repay the cash advance by using the Yoco supplied card machine. Every time a customer swipes their card on the machine to make a payment a fixed percentage of that sale goes towards paying back your loan. Capital amounts received in advance vary from a mere R2 000 to R1-million. 

5. Retail Capital

Retail Capital partners help you through innovative funding solutions, where flexible repayment options are determined by your business performance. To qualify you must have ownership of your business for more than six months, be trading for more than three months, and have a turnover of R30 000 or more per month. 

6. Business Fuel

Business Fuel assists the SME market across South Africa with affordable business loans of up to R2-million granted within 72 hours. The process is performed online and aims at creating a paperless process and ease of loan application in South Africa. Loans often vary based on industry and business revenue.

7. Fincheck

Fincheck partners with South African banks, lenders, and insurers, offering a live and independent means of comparing and applying for finance across 30 lenders. Fincheck is focused on truly South African SME’s with loans from R2 000 to R72-million.

8. Fundrr

They provide small business funding that is tailored to help you grow your business on your terms. They understand your needs, through data. They developed an automated credit model that analyses an estimated 100 data points to provide an in-depth picture of the growth possibilities for your business. Their platform provides easy access to small business financing and gives you the freedom to focus on other aspects of running your business.  Short term financing ranges from R20 000 to R500 000.

Vault - Business Finance in South Africa -getlion

And now is a more important time for innovation than ever! The Covid-19 pandemic has had a detrimental effect on SME’s in South Africa. With various companies having to shut their doors, South Africa is losing their lifeblood in the economy. Lobby group, Progressive Blacks in ICT (PBICT), which has 3 000 SMME members in incubation nationally, told ITWeb, that none of their members have been able to secure any of the government’s financial relief schemes aimed at assisting businesses which have been negatively impacted by the Covid-19 pandemic. Sadly, even the government’s Covid-19 relief fund is yet to have an impact on SME’s, so alternative financing could be the way to save countless businesses during these trying times.

Watch this space. At getlion, we’re building a first-of-its-kind Funding Portal, where users will be able to find and apply for alternative funding with each. For more information download the getlion business app for free via the Android and iOS stores today.