Funding options for transport and logistics businesses in South Africa are usually judged on cost, but the thing that often decides them is timing.
There can be a substantial gap between covering the fuel, wages, and tolls for a contract and receiving payment for the job. The bigger the contract, the bigger this gap can be, which can put enormous pressure on the operator’s cash flow.
Traditional banks tend to fall short with funding in this area due to strict criteria and slow payouts, but a new raft of funding options is stepping up to fill this gap.
Read on to find out about six of the best alternative providers out there.
Two Cash Gaps
Transport and logistics firms typically face two cash gaps: the first happens on a regular basis and is the shortfall you experience once you pay diesel, wages, tolls and maintenance, then wait for the invoice to come in. Even businesses with regular work often never close this gap.
The second gap is capital. Because money is constantly being used to fund projects, there’s not enough to buy the trucks or trailers that need replacing.
Both of these gaps can cause severe problems, and traditional lending can add to the pain in terms of high costs and delayed lending.
The next section lists those six alternatives worth looking at.
1. Lula Cash Flow Facility
Lula’s Cash Flow Facility works brilliantly for transport businesses that need to cover unpredictable costs like rising fuel prices. Instead of paying interest on the whole facility, which can be up to R5 million, you simply pay a fee based on how much you borrow. There are no monthly account or admin fees, and no early repayment charge.
Lula also works on a quick schedule. Once approved, you’ll get funding within an average of 22 hours, and you can reuse the facility as many times as you want without reapplying.
Best for: Fuel, wages and tolls between invoice dates.
2. Lula Fixed-Term Funding
You might know exactly what the next transport business idea or capital purchase will cost, in which case Lula also covers you. You can get a once-off lump sum repaid over 3, 6, 9 or 12 months at a fixed fee, with no early settlement penalty.
Let’s say you need to put a deposit down on a vehicle: Lula’s funding will let you do so and start earning from its use, rather than waiting until you have enough cash.
Best for: Vehicle deposits and other one-off costs with a known total.
3. Merchant West Invoice Discounting
If your clients are corporates, mines or state-owned entities, your unpaid invoices are your most fundable asset.
Merchant West advances 70% to 85% of invoice value, confidentially. The assessment shifts to your client’s creditworthiness, which favours younger businesses holding solid contracts.
Best for: Consistent debtor books on 60- to 90-day terms.
4. WesBank Vehicle and Asset Finance
Many transportation firms look for structured repayments so they can confidently predict outgoings over the next 12 months. WesBank is a good fit for this if you’re one of these firms and you’re looking for new trucks and trailers.
This provider gives you the option to step-up or balloon-weight instalments to match your seasonal route book so you don’t find yourself struggling during lean periods.
Best for: Expanding your fleet affordably with a clear repayment plan.
5. Absa Commercial Asset Finance
Instalment sales and leases over 12 to 60 months. Absa runs joint ventures with MAN Financial Services for trucks and buses and Link Finance for trailers, which can beat a general application on those assets. Its fleet card is accepted at toll plazas nationwide.
Best for: Fleet acquisition with fuel and toll management in one place.
6. Sourcefin Purchase Order Funding
When a signed contract is larger than your ability to mobilise for it, purchase order funding covers that specific job against the order.
Sourcefin assesses the order and the client behind it, so a thin trading history matters less. Each deal is assessed separately, so the admin load is heavier.
Best for: A single large contract you can service but cannot fund.
What You Need to Qualify
The above funders may be more accessible than a bank, but they’ll still need to see proof that your business is healthy enough to repay. Bank statements and credit scores are still central to this, but some lenders take into account other details.
Lula, for example, will assess your recent transaction history and upcoming orders to get a more accurate measure of your business. This is as well as asking for proof of one consecutive year of trading, monthly revenue of R40 000 or more and South African registration. This way, they can find the best possible package to help your business.
Once you know you qualify, the question becomes which product actually suits the shortfall you are trying to cover.
Which One Fits Your Gap?
Recurring shortfalls point to a facility you can draw from repeatedly. A single oversized contract points to purchase order funding. A truck points to asset finance, and the deposit on it points to a fixed-term amount.
Most established operators run two at once, because asset financiers assess the asset while working capital funders assess the trading account. Having one does not disqualify you from the other.
The key is to ensure that you know your full repayment schedule at all times so that you can map out the short-term cash position of your business with confidence.
