Local trade finance 

A Guide to Small Business and SME Loans in South Africa

January 24, 2024
Coffee shop owner

The South African Government recognises the pivotal role that Small to Medium Enterprises (SMEs) play in driving economic growth. One of the primary barriers hindering the growth of SMEs is the limited access to finance. The government has committed to removing these obstacles, and making the credit market more accessible to emerging businesses. Yet, while the government's role is crucial, there are times when SMEs might need to turn to the private sector for support.

What defines a small business loan?


  • Online Accessibility: Numerous fintech startups and other lenders present a platform for businesses to apply for loans.
  • Swift Approval: Upon a successful application, businesses can often have the funds transferred to them within 24-48 hours, eliminating the need for in-person visits or cumbersome paperwork.

Flexible Payment Terms

  • Duration: Lenders typically offer 12-month repayment periods. However, better businesses offer month-to-month flexibility, like Payabill.
  • Early Settlement: Some lenders provide a settlement fee for those who choose to pay off the loan in advance.

Type of Small Business Loan

Loans for small businesses are more than one-size-fits-all. Depending on specific requirements, companies can opt for:

Qualifying Criteria

For a majority of lenders in South Africa:

  • The business should have been operational for a minimum of 12 months.
  • A monthly turnover of roughly R40,000 or an annual revenue exceeding R500,000 is needed.
  • Some lenders focus on niche industries or specific business needs like asset financing.

Repayment Terms

  • Flexible Options: Depending on the lender, payments can be made daily, weekly, fortnightly or monthly.

Key Considerations When Seeking a Small Business Loan and Selecting a Lender

When navigating the myriad of options available for SME loans in South Africa, it's vital to approach the decision discerningly. Clarifying what different lenders offer and their requirements can make all the difference in ensuring you secure a loan that aligns with your business's unique needs.

Assessing Trading History Requirements

Different lenders have varied benchmarks when it comes to trading history. Your annual revenue and profits testify to your business's financial robustness. As such, the healthier these figures, the more advantageous your position when applying for a loan.

Crucial Queries Before Opting for an SME Loan

Before diving into the pool of SME loans, it's paramount for South African business owners first to clarify their motivations and requirements. Start by introspecting on the primary reason behind seeking financial assistance. Is it to buy more stock, enhance marketing strategies, recruit staff, or acquire pivotal equipment? Aligning your business's needs with a lender's offerings ensures a harmonious financial relationship. Moreover, always opt for a lender who mirrors your business's ethos, is transparent about all costs, and offers a product tailored to your needs.

The mechanics of acquiring a loan are equally significant. While the allure of speedy and hassle-free online applications is undeniably appealing, be prepared with essential documentation, including, but not limited to, up-to-date management accounts, comprehensive financial statements, tax clearance certificates, and, in some cases, a robust business plan. A meticulously detailed plan showcasing how the loan will elevate profits and encompass current and forecasted financials can be the linchpin in gaining a lender's trust and securing that much-needed loan. However, in the case of Payabill, we only require some of this information, making it a much quicker and easier choice for acquiring a loan.

Read more: Invoice financing for small businesses

Types of alternative funding

Navigating the financial landscape as a small business owner in South Africa? Here are alternative financing avenues tailored to SMEs:

  1. Bridging Finance

  • They are often referred to as a bridge loan
  • Purpose: A temporary solution to fund working capital needs, such as stocking inventory or managing daily operating expenses
  1. Purchase Order Finance

  • Funds dedicated to fulfilling specific contracts or orders
  • Purpose: Supports the procurement of supplies and resources required to complete a contract, ensuring timely delivery and maintenance of business reputation

  1. Inventory Loans

  • A loan designed to buy stock
  • Purpose: Particularly beneficial for businesses centred around tangible products, ensuring shelves remain stocked and operations run smoothly

  1. Working Capital Finance

  • A boost to your business's primary financial fuel – its working capital
  • Purpose: Infuses cash flow into the business, preventing potential financial hiccups and ensuring smooth operations

  1. Merchant Cash Advance

  • A unique loan structure where funds are advanced based on card terminal payments
  • Purpose: Best suited for businesses with significant card transactions. The loan amount and repayment terms adjust according to the monthly revenue stream

  1. Business Credit Cards

  • Not just for individuals, credit cards also cater to businesses.
  • Purpose: Ideal for covering routine business expenses, from stationery to utilities, and can offer the flexibility of deferred payments

Remember, each financing type has unique advantages; the best fit will depend on your business's specific needs and operational model.

Business Revenue Requirements

To qualify for a small business loan in South Africa, firms must adhere to specific criteria and provide essential documentation.

  • Essential business details.
  • Recent business bank statements.
  • Financial reports pertinent to the business.
  • Clarity on invoices or financial obligations.

Trading History Requirements

The business trading background plays a pivotal role in loan eligibility. Specifically:

  • The business entity should either be a (Pty) Ltd. or CC.
  • A minimum trading history of 12 months is required.
  • The firm's annual turnover should be at least R500,000.

Common Pitfalls: Reasons for Loan Denial Other Institutions

When seeking financing, small businesses should be aware of potential roadblocks. Here are the common reasons they might face rejection:

  1. Inconsistent cash flow.
  2. Providing mismatched or erroneous information.
  3. Submitting outdated or inaccurate financial statements and management reports.
  4. Failure to back up claims with tangible data or documentation.
  5. The entrepreneur’s deficiency in technical know-how or business wisdom.
  6. Unjustified or unsubstantiated financial forecasts and budgets.

Most of these reasons would not stop you from getting a loan from Payabill. Apply now for a provisional answer in under a minute.

Read more: Effects of load shedding on small businesses

The benefits of Payabill’s small business loans

  • Accessibility: Unlike larger loan corporations, Payabill offers a streamlined and simplified loan application process tailor-made for SMEs.
  • Efficiency: Renowned for its swift loan procedures, most loan applications are finalised within hours.
  • Affordability: With a competitive edge in pricing, Payabill ensures clients aren’t just another number. They are notably 10-60% more cost-effective than rival small loan providers.
  • Cost Advantage: Their affordability stems from the early adoption of digital technology. Payabill operates efficiently and transfers these savings to their customers.


SMEs can garner valuable insights into business financing, understanding the diverse loan options available and the importance of aligning with a lender that genuinely comprehends their unique needs.

As businesses navigate this terrain, Payabill emerges as more than just a lender; it's a partner dedicated to their success. Offering tailor-made solutions, transparency, and efficiency, Payabill encapsulates what SMEs should seek in a financial ally, making it the optimal choice for those aiming to flourish.

Apply now