South Africa’s small and medium-sized enterprise (SME) lending market is entering a new phase.
After years of non-bank lenders filling gaps left by traditional institutions, banks are once again moving decisively into the secured SME space – and the competition is intensifying.
Based on transaction activity across the sector, we estimate the secured non-bank SME lending market to be approximately R10 billion, excluding unsecured lending.
While banks have historically preferred to fund non-bank lenders rather than lend directly to SMEs, this dynamic is shifting. The major banks are increasingly looking to deploy capital directly into this segment, particularly where property or hard security exists.
Banks, property development and the role of non-bank lenders
We are seeing this most clearly in property development finance, where banks are becoming more active competitors.
However, traditional bank funding often comes with stringent conditions – most notably pre-sale requirements of 70% or more before capital is released.
This is where experienced non-bank lenders continue to add value.
By funding developers earlier in the development cycle, offering supplementary facilities alongside banks, or structuring deals without pre-sale requirements, non-bank lenders can often unlock projects faster.
In a rising property price environment, earlier access to capital can outweigh the benefit of marginally cheaper bank funding.
Unsecured lenders moving up the risk curve
Another emerging trend is unsecured lenders attempting to move into larger, secured facilities as growth in small-ticket unsecured lending begins to plateau.
While the strategy is understandable, secured lending is a fundamentally different business.
It requires deeper due diligence, legal structuring, asset verification and, critically, strong personal relationships with borrowers.
Lenders built on low-touch, technology-only models may struggle to adapt to the expectations of SME clients in this space.
At Geddes, technology and AI play an important role in speeding up due diligence and reducing the time from signed term sheet to payout. But this is balanced with a deliberately hands-on, relationship-driven approach. That may limit scale, but it aligns with the needs of SMEs seeking larger, secured facilities.
Niches
As competition increases, lenders are differentiating on speed, pricing, or by operating in niches that were historically underfunded.
These include purchase order finance, early-stage SME funding, and lending into the gig economy and township markets.
These segments offer opportunity, but they also carry higher risk.
The sustainability of many of these models will only become clear over a full credit cycle.
Fica – an unavoidable constraint
One constant across all lending models is regulation.
The requirements of the Financial Intelligence Centre Act (Fica) are not going away and are likely to become more onerous. While there is meaningful innovation aimed at improving the client experience, full compliance remains non-negotiable.
At Geddes, we take Fica and regulatory compliance extremely seriously. We would rather delay a payout to ensure every requirement has been properly met than be pressured into moving quickly at the expense of compliance.
In secured SME lending, cutting corners creates long-term risk for both the lender and the borrower, and that is a trade-off we are not prepared to make.
The time and documentation required to meet regulatory standards will increasingly challenge lenders promising ultra-fast payouts, particularly in more complex secured transactions.
What SMEs can do to improve access to funding
For SMEs seeking finance, preparation remains one of the most effective advantages:
- Ensure Fica documentation is complete and up to date for all directors and beneficial owners;
- Avoid unnecessary complexity in corporate structures;
- Keep financial records current and professionally prepared;
- Stay tax compliant, including with regards to value-added tax (Vat) submissions;
- Be transparent about all bank accounts; and
- Ensure property documentation, title deeds, and rates are in order.
Securing the best available interest rates and doing so in the shortest possible time is highly dependent on having the right due diligence and Fica documentation in place from the outset.
SMEs that get these fundamentals right consistently stand head and shoulders above other applicants, often placing themselves first in line when credit decisions are made.
These fundamentals materially reduce friction, speed up credit decisions, and improve outcomes for both borrower and lender.
Looking ahead
SME lending in South Africa is becoming more competitive, more regulated, and more nuanced.
Technology will continue to improve efficiency, but experience, judgement and relationships remain central to sustainable lending.
For SMEs, transparency and preparedness matter more than ever.
For lenders, those who balance speed with discipline and innovation with experience, will be best positioned to navigate the next phase of the market.
Ultimately, the lenders that will succeed in the next phase of SME finance are those that combine speed with discipline, and technology with experience.
Geddes has been built around that balance, using technology and AI to move faster and smarter, while maintaining a relationship-led approach to credit that recognises the realities SMEs face on the ground.
It is this combination of rigour, flexibility and partnership that continues to resonate with borrowers seeking dependable capital in an increasingly complex lending environment.
Brought to you by Geddes Capital.
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