How SA alt-lenders underwrite SME applications

When a funding application stalls, or comes back with a lower offer than expected, the reason is usually the same: the lender’s underwriting looks at different things from the ones the owner expected. Here is what SA alternative lenders weigh, in rough order of importance.

1. Bank statement analytics (the big one)

For most SA alternative lenders the single most important document is your last three to six months of business bank statements. They are run through an analytics engine, from a third-party provider or built in-house, that works out:

• Your average monthly turnover and its trend: flat, growing or declining (declining is a big no)
• Daily and weekly minimum balances: how close the account gets to zero
• The number of credits: how many distinct customer payments come in
• Bounced debit orders and returned items: a red flag
• Whether you already service another debt: existing loan or advance deductions are visible

In practice: if the business trades through a personal account, or mixes business and personal money in one account, the analytics get confused and the offer comes back lower. Run everything through a dedicated business account for about three months before you apply.

2. Credit record (more yes-or-no than nuanced)

Lenders pull credit bureau reports on the business and on the directors personally. They are not looking for perfection; they are looking for deal-breakers:

• Outstanding judgements, especially against directors: often an automatic decline
• Recent defaults (the last 12 to 24 months): flagged, and may end the application
• Administration orders or sequestrations: a decline
• A thin file (no credit history at all): not a decline, but a smaller offer

A few late payments won’t end an application. An unpaid judgement almost certainly will. Settle judgements before you apply. Under the National Credit Act as amended in 2014, a judgement that has been paid in full should be removed from your credit record: get proof of payment from the creditor, have the judgement rescinded where needed, and ask the credit bureaus to remove it. Check your report afterwards, because removal is not always automatic.

3. Time in business

Almost every SA alternative lender sets a minimum trading history:

• 6 months: the floor, and only a few lenders go this low
• 12 months: the most common minimum
• 24 months: often needed for larger or unsecured amounts
• 36 months or more: usually needed for property finance and larger asset finance

4. Industry

Lenders keep internal risk ratings by industry. Hospitality, retail, professional services and logistics are generally fine. Construction sub-contracting, mining services, gambling and crypto are often excluded outright or priced high.

5. Director profile

Who is behind the business matters, especially above R1m. SA lenders look at whether the directors have run businesses before, how long they have been involved, and whether they are SA tax resident (directors living abroad complicate identity checks and collections).

6. Documents to have ready

• Three to six months of business bank statements, as PDFs downloaded from internet banking (lenders reject scans and screenshots)
• CIPC company documents: the registration certificate (CoR14.3), share register and shareholder details
• ID copies for all directors
• Latest management accounts or financial statements, usually needed for larger amounts
• Tax compliance status (for larger amounts)
• A short note on what the money is for and how it will be repaid; lenders ask for this more and more

How to prepare for a clean approval

• Run everything through a dedicated business bank account for at least 90 days before applying.
• Settle any judgements you can, and have the paid ones removed from your record.
• Have three months of clean bank statements ready as PDFs.
• Know your average monthly turnover to the nearest R10k; lenders ask, and check it against the statements.
• For larger amounts, apply to one lender at a time; several credit enquiries at once look like stacking.

See what you’ll qualify for.

Give Frank one set of answers, about a minute, and it checks your business against each panel lender’s published rules. You see which lenders fit, and the rule that ruled out the others, before you apply anywhere: See your funding options.