The Three Axes of Business Debt

A simple way to understand what you're really borrowing against
Lynette du Plessis · 10 March 2026

We all know what debt means.

You borrow money from someone and repay them — usually the full amount, plus interest and fees.

Simple stuff.

Until it's not.

Today, there are a lot of different debt products available to SMEs and businesses. And business owners are tasked with finding, understanding, and choosing the one that fits their business best.

That's no small ask.

And exactly where Frank comes in.

Frank is South Africa's most complete business funding directory. Every option, honestly explained and clearly compared. We help you explore your funding options, filter by what matters to your business, and present the facts clearly — so you can decide what to apply for.

As I build Frank, I thought it a necessary and, hopefully, insightful exercise to delve a little deeper into debt instruments. Specifically, to find a cleaner way of categorising them so they're easy to understand and compare.

And in doing so, I discovered a lovely little system I like to call The Three Axes of Business Debt.

The Three Axes of Business Debt

With The Three Axes of Business Debt, we consider each instrument along three independent dimensions:

1. Funding structure (what powers repayment)
2. Repayment mechanism (how repayment actually happens)
3. Security structure (what protects the lender if things go wrong)

If none of that makes sense to you yet, don't worry. If my writing is any good, it will in about two minutes.

Dimension 1: Funding Structure

What economic asset or cashflow is the loan built around?

In other words, what is the lender really relying on to get repaid?

Different instruments depend on different sources of repayment:

• Term loan: The business's overall cashflow
• Line of credit: Ongoing working capital cycles
• Revenue-based finance / MCA: Percentage of sales revenue
• Invoice finance: Outstanding invoices
• Trade finance: Inventory or purchase orders
• Asset finance: A specific asset
• Property finance: Real estate

Funding structure plays an essential role since it determines two key things:

1. What type of business qualifies
2. What information the lender cares about

For example, an invoice finance lender cares deeply about your customers and their payment behaviour. While a revenue-based lender cares much more about your sales consistency and cashflow.

Dimension 2: Repayment Mechanism

How is the loan repaid in practice?

This describes the cashflow pattern of repayment, not the underlying source.

• Term loan: Fixed monthly instalments
• Line of credit: Revolving draw and repay
• Merchant cash advance: Percentage of daily revenue
• Invoice finance: Invoice settlement
• Bridging loan: Bullet repayment

Why this matters: the repayment mechanism determines how stressful a loan will feel for your cashflow.

• Fixed instalments are predictable but rigid
• Revenue-linked repayments rise and fall with your sales
• Revolving facilities allow flexible borrowing and repayment

So even if two products fund similar things, they can be a stronger or weaker fit for your business based on their repayment structure.

Dimension 3: Security Structure

What protects the lender if repayment fails?

This is essentially the risk mitigation layer.

The lender asks: If the borrower cannot repay, how do I get my money's worth back?

• Unsecured: No pledged asset
• Personal surety: Directors personally liable
• Asset-backed: Equipment or vehicles pledged
• Receivable-backed: Invoices pledged
• Inventory-backed: Goods pledged
• Property-backed: Real estate collateral

Security is important, but it is not the core identity of a lending product.

This is why splitting loans into "secured vs unsecured" is often misleading — many products can be either, depending on the deal.

For example, a term loan might be unsecured for one business and secured for another, based on the funding amount or the risk profile of the borrower.

Invoice finance is technically secured on invoices, but the structure itself already revolves around receivables.

So security is best understood as a layer on top of the core funding structure, not the primary classification.

Mapping the Universe of Business Debt

Once you start looking at debt through the lens of these three dimensions, something interesting happens:

Of the three axes, funding structure stands out as the axis that most clearly defines the nature of the debt product.

Repayment mechanisms and security structures still matter, but they tend to describe how the loan behaves or how risk is mitigated, rather than what the loan is fundamentally built around.

When you group business debt using this primary axis (the underlying source of repayment) a small number of structural families begin to appear:

• Cashflow lending: funding built around the overall operating cashflow of the business
• Receivable-based lending: funding advanced against outstanding invoices
• Trade finance: funding tied to specific commercial transactions
• Asset-backed lending: funding secured against equipment or vehicles
• Property-backed lending: funding secured against real estate

1. Cashflow Lending

Cashflow lending relies primarily on the overall operating cashflow of the business.

The lender's core assumption is that the business generates enough ongoing cash to repay the facility over time.

Common examples include:

• Term loans
• Lines of credit
• Revenue-based finance / merchant cash advances

These instruments are often used for general working capital, expansion, or smoothing out short-term cashflow needs.

Because repayment depends on the health of the business itself, lenders in this category tend to care about factors like revenue stability, profitability, time in business, and historical financial performance.

2. Receivable-Based Lending

Receivable-based lending advances funding against outstanding invoices owed to the business.

Instead of waiting 30–90 days for customers to pay, businesses can access a portion of that cash immediately.

Examples include:

• Invoice finance
• Factoring
• Invoice discounting
• Selective invoice finance

In this structure, the lender is effectively relying on the borrower's customers to repay the facility.

Because of this, lenders often evaluate the quality of the borrower's customers, invoice payment terms, historical payment behaviour, and invoice volumes.

3. Trade Finance

Trade finance supports specific commercial transactions, usually involving the purchase and resale of goods.

These facilities help businesses fund inventory or supplier payments before the goods are sold.

Examples include:

• Purchase order finance
• Import finance
• Supplier finance
• Inventory finance

Repayment generally occurs once the goods are sold or once the resulting invoices are paid.

Because the funding is tied to a specific transaction, these facilities are typically short-term and deal-specific.

4. Asset-Backed Lending

Asset finance funds the purchase of specific equipment or vehicles used in the business.

Examples include:

• Vehicle finance
• Equipment finance
• Machinery loans

In most cases, the asset being financed acts as the primary collateral for the facility.

These loans are usually structured with fixed instalments over a defined term.

5. Property-Backed Lending

Property-backed lending involves loans secured against real estate.

Examples include:

• Commercial property loans
• Development finance
• Bridging loans

Because they are tied to property rather than operating cashflow, these facilities behave very differently from typical SME working-capital loans.

They also tend to be longer-term and larger in size.

A quick note

Some of these categories might sound like they describe the collateral behind the loan (for example assets or property).

But what we're actually grouping here is the main source of repayment.

In other words: What ultimately pays the loan back?

• In cashflow lending, repayment comes from the business's ongoing cashflow.
• In receivable finance, repayment comes from customer invoices being paid.
• In trade finance, repayment comes from completing a specific trade transaction.
• In asset finance, repayment is linked to the purchase and use of a specific asset.
• In property lending, repayment is tied to the value or income of property.

Collateral can still exist in many of these structures, and in some cases it overlaps with the structure itself. But it isn't what defines them.

What defines them is where the money to repay the loan comes from.

Where We Go From Here

In this article we've mapped the structural families of business debt.

Think of it as the landscape of business debt.

But within each of these families sit the actual instruments lenders offer — the products business owners encounter in the real world.

For example:

• Cashflow lending includes term loans, lines of credit, and revenue-based finance.
• Receivable finance includes invoice finance and factoring.
• Trade finance includes facilities designed to fund inventory and supply chains.

In the next articles we'll explore these instruments one by one and see how they work in practice.

Because, while the map is useful, most business owners are interested in one thing and one thing only:

Which one of these fits my business? And why?

And that is exactly the question Frank is being built to answer.