AFG Blog

Navigating the alternative landscape in South Africa: A comprehensive guide for SMEs

Accessing finance is a common challenge for small and medium-sized enterprises (SMEs) in South Africa. Traditional bank loans often come with strict requirements that hinder SMEs' growth potential. However, the rise of alternative finance options has opened new avenues for SMEs seeking funding. In this comprehensive guide, we will explore the alternative finance landscape in South Africa and provide SMEs with valuable insights and options to navigate this thriving sector, including the services offered by businesses within the Alternative Finance Group (AFG).

Understanding Alternative Finance

Alternative finance encompasses non-traditional funding methods that have gained popularity among SMEs. These options offer greater flexibility and accessibility, tailored to the unique needs of businesses. They provide an opportunity for SMEs to bridge the financing gap and foster growth.

Types of Alternative Financing Available in South Africa

  • Asset-Backed Short-Term Loans:

CorpFin, a member of the Alternative Finance Group, specializes in providing asset-backed short-term loans. SMEs can leverage their valuable assets, such as property, land, equipment, or inventory, as collateral to secure quick capital for their business needs. This form of loan is typically handy when a business has a high-yielding opportunity ahead and needs financing in a short matter of time to act and prevent missing out.

  • Government Purchase Order Funding:

ProfitHub, another member of the Alternative Finance Group, offers government purchase order funding. This service assists SMEs in fulfilling large government contracts by providing upfront funding against confirmed purchase orders, enabling them to fulfil the order requirements and seize growth opportunities. ProfitHub also aids with supply and delivery and ensures that profits are continually optimised for its clients.

  • Government Invoice Discounting:

Again, ProfitHub provides additional funding to the suppliers by way of invoice discounting. This is when the supplier is awaiting payment from a project already completed for a government sector and would like to better their cash flow by receiving payment earlier than agreed upon. ProfitHub essentially “buys” the invoice at a discounted rate from the supplier upfront.

  • Property Bridging Finance:

QuickBridge, part of the Alternative Finance Group, caters to the financing needs of businesses and individuals requiring property bridging finance. This service allows SMEs and individuals to receive their money earlier after a property has been sold but money has not yet been received by the seller. As we all know the property transferring process takes a few months and bridging finance allows you to skip this process completely. QuickBridge will pay up to 75% of the proceeds so that you can put the money to work.

  • Invoice Discounting/Factoring:

DiscountDesk, a business within the Alternative Finance Group, specialises in offering invoice discounting and factoring services. SMEs can unlock the value of their outstanding invoices and receive a portion of the funds upfront, improving cash flow and providing working capital for business operations.

Factors to Consider When Choosing an Alternative Finance Provider

Selecting the right alternative finance provider is crucial for SMEs. Consider the following factors before deciding:

  • Reputation and Expertise:

Research the reputation and expertise of alternative finance providers. Look for providers with a proven track record and extensive experience in their respective financing domains. The Alternative Finance Group (AFG) benefits from having expertise in almost all sectors of the alternative financing space making sure that clients find the product that fits their business like a glove.

  • Terms and Conditions:

Evaluate the terms and conditions offered by different providers. Compare interest rates, repayment terms, and any additional fees to ensure they align with your business's financial goals and capabilities.

  • Customer Support and Flexibility:

Assess the level of customer support and flexibility provided by the alternative finance providers. Look for providers that offer personalised assistance, tailored solutions, and the ability to adapt to your specific business needs.

Navigating the alternative finance landscape in South Africa is a vital step for SMEs seeking flexible and accessible funding options. By understanding the various alternative finance methods available, such as asset-backed short-term loans, government purchase order funding, property bridging finance, and invoice discounting/factoring, SMEs can unlock new opportunities for growth and expansion.
The Alternative Finance Group is committed to supporting South African SMEs on their financing journey. Our team of experts is ready to assist you in finding the right alternative finance solution tailored to your business needs.
To explore the alternative finance options available and receive personalised guidance, please don't hesitate to contact any of our companies for assistance.
Contact details and links to all of the groups companies can be found by clicking here