Part 3 of 7 · Where the money is
Where Can Entrepreneurs Access Working Capital?
Eleven practical sources, from supplier credit to structured bank facilities. They differ less in price than in what they assess — and that is what should drive your choice.
Log scale. Ranges compiled from published product information and market practice; individual providers vary.
Source 1Supplier and trade credit
- Ask every significant supplier for terms, and ask again after six months of clean payment. A supplier with margin on your volume has commercial reason to say yes.
- Where you already have terms, ask to extend from 30 to 45 or 60 days. Each additional day of payable terms is a day removed from your funding requirement at zero cost.
- Weigh settlement discounts properly. A 2.5% discount for paying at 10 days instead of 30 is an effective annualised cost of roughly 45% if you forgo it — so where cheaper facilities exist, take the discount and draw on the facility.
- Formalise it in writing. A verbal terms agreement disappears when the supplier’s credit controller changes.
Source 2Bank overdrafts and revolving facilities
- What banks require. Typically two to three years of financial statements, six to twelve months of business bank statements, up-to-date management accounts, tax compliance, and security — commonly a bond, a cession of debtors, or personal surety from directors.
- What to negotiate. The facility limit, the annual review date, the margin over prime, and the extent of personal surety. Surety is frequently reducible in scope where corporate security is strong, but only if you raise it.
- The discipline it demands. An overdraft that never returns to zero has become a term loan by stealth, and the bank will notice at review. Structure the business so the facility clears at least once a quarter.
Source 3Bank term loans
Banks will look hard at whether repayment can be serviced from operating cash flow rather than from the proceeds of the thing being funded. If the only repayment source is the success of the project, the application is an equity proposition being presented as debt, and it will be assessed as such.
Source 4Asset and equipment finance
Vehicles, plant, IT equipment, refrigeration and production machinery are all routinely financed this way. Sale-and-leaseback of equipment you already own is a legitimate route to releasing cash from the balance sheet, though it converts an owned asset into a monthly obligation and should be costed accordingly.
Source 5Invoice discounting
- It assesses your customer, not you. This is the critical point. A young business with a creditworthy customer — a listed corporate, a large retailer, a government department — can access invoice discounting when no bank will lend to it. Your customer’s balance sheet is doing the work.
- It is not conventional debt. The advance resolves when the invoice is paid rather than sitting on your balance sheet as a term liability, and it typically requires no dilution of ownership.
- Confidentiality varies. Under discounting you normally retain the customer relationship and collect payment yourself, so the arrangement is invisible to your client.
- Concentration matters. A receivables book resting on one customer is riskier to the funder than a spread book, and will be priced or limited accordingly.
- Only uncontested invoices qualify. The goods or services must be delivered and accepted. A disputed invoice cannot be funded, however good the customer.
Source 6Invoice factoring
Where the client relationship is commercially delicate — a relationship-driven B2B account, or a customer who would read third-party collection as a sign of distress — discounting is usually the better choice despite the marginally higher administrative burden of collecting yourself.
Source 7Purchase order funding
- There must be a genuine purchase order or tender award from a creditworthy buyer. Expressions of interest and verbal commitments do not qualify.
- It is the standard route for tender delivery, and particularly relevant given the volume of infrastructure and government procurement in the market.
- The funder assesses your supply chain as well as you, because their money is at risk if your supplier fails to deliver.
- Combined with invoice discounting it covers the full cycle: PO funding pays for delivery, and discounting bridges the wait for payment afterwards.
Source 8Merchant cash advances
Repayment flexes with revenue, which suits businesses with seasonal or volatile trade such as retail, restaurants, salons and tourism. It is appropriate for a short, certain gap with a clear commercial return — restocking ahead of a peak trading period, for instance. It is dangerous as a substitute for structural funding, and the most common failure pattern is a business refinancing one advance with another while daily deductions consume the margin.
Source 9Fintech and data-driven lenders
They suit businesses with predictable monthly turnover that need quick top-up cash. Always convert the quoted fee structure to an annualised rate before comparing, and read the early-settlement terms — some facilities charge the full fee regardless of when you repay, which removes any benefit from settling early.
Source 10SEDFA and public finance
- Direct lending. Bridging finance for confirmed contracts and purchase orders, revolving credit, term loans and asset finance.
- Wholesale lending. On-lending through microfinance institutions, retail financial intermediaries and specialist funds to reach smaller enterprises at scale.
- Credit guarantees. Indemnity products issued to banks and other lenders on behalf of borrowers whose access to finance is blocked by lack of collateral. This is one of the most useful and least requested instruments in the country: it exists precisely for the business a bank likes but cannot secure.
- What to expect. Concessional pricing, a substantially longer process than private funders, and rejections driven overwhelmingly by incomplete CIPC documents, missing tax compliance status, and bank statements that do not reconcile to the stated business profile.
Source 11Enterprise and supplier development
This is among the most accessible capital in South Africa for a business already supplying a large corporate, and among the least contested because comparatively few suppliers ask. The question costs nothing and is frequently answered by someone whose performance is measured on deploying exactly that budget.
