Bank overdrafts might fill some small business owners with dread, but that’s only because traditional facilities tend to come loaded with high fees and strict repayment terms.
This can cause a headache for small and medium-sized enterprises (SMEs). Often, after borrowing money, they find that they aren’t ready for the costs that follow. They also often find that limits are pegged to collateral or, later on, that facility reviews cut back on their available credit just as trading picks up.
Fortunately, not all funding facilities are like this. Keep reading to find out about six alternatives to a business bank overdraft in South Africa. Flexible and affordable, they are structured to help SMEs grow instead of holding them back.
1. Lula Cash Flow Facility
Business overdrafts get a bad reputation for several reasons, but one of the most frustrating is when the bank charges interest or fees on the total facility amount, whether you’ve drawn a cent of it or not.
Lula’s Cash Flow Facility works differently. You only pay a fee for what you use; if you don’t use it, the untouched portion costs you nothing. There’s no interest charged, and you’ll also pay no admin or monthly costs.
More than 25 000 businesses have used Lula because they don’t encounter many of the traditional hurdles to funding. Applying online takes minutes, and Lula assesses your business as a whole, rather than just relying on bank statements and credit history, which can be misleading.
Once approved, you’ll have access to the funds within 24 hours, and you don’t need to reapply if you choose to draw down funding for a second time after repayment.
Such a straightforward process explains why Lula has funded more than R13 billion to date and is trusted by so many small business owners.
Best for: All types of SMEs looking for flexible funding from a provider that feels more like a growth partner than a bank.
2. Bridgement
Bridgement offers a line of credit to businesses, which they assess using advanced AI technology. To apply, you can connect bank data or accounting software to their platform, instead of using paperwork, and you can expect a decision within a day or two.
Many small businesses use Bridgement as a type of bridging funding when they need to close the gap between delivery and customer payment, which can often take up to 60 days for B2B businesses.
Best for: Businesses looking for fair and flexible business funding from a trusted provider.
3. Merchant Capital
Merchant Capital’s lending model is based on advancing a lump sum against future card sales, in which they collect a percentage of daily card turnover until repayment is complete.
This works for businesses that experience steady income, like restaurants and retailers, but can strain those that go through seasonal swings.
Best for: Service businesses looking for swift financing that are comfortable borrowing against future income
4. GroWise Capital
GroWise Capital funds SMEs up to R3 million off a short online application, with payouts that can land within hours of approval.
Its underwriting focuses on the sustainability of your cash flow, and its consultants take a hands-on approach, closer to a private banker than a call centre. This is worth investigating if your sector or trading pattern has made bank approvals difficult, as the company positions itself around businesses that other funders tend to pass on.
Best for: Small businesses looking for a working relationship with the provider, as well as funding.
5. iKhokha Cash Advance
If you’re already taking card payments on an iKhokha machine, then an iK Cash Advance offers up to R1 million based on your trading history with them, repaid as a small percentage of daily card sales, with funds typically available within 24 hours.
Merchants need roughly six consecutive months of trading on the platform. The obvious limitation is scope: your offer reflects sales processed through iKhokha alone, so revenue arriving by EFT or through another terminal does nothing for your limit.
Best for: iKhokha customers looking for funding based on their trading history on the platform.
6. TymeBank
TymeBank’s SME funding arm, built on its acquisition of Retail Capital, provides working capital advances repaid through a share of turnover, backed by a bank’s balance sheet.
It appeals to owners who want established banking infrastructure behind their funder while keeping turnover-linked collections rather than a fixed monthly debit order. Amounts and terms depend on your trading history and how you accept payments.
Best for: Businesses seeking the dependable nature of a bank with lower costs.
Which One Fits?
Often, the best types of funding available to small businesses are those that fit with the type of trading the business does.
If you’re a card-heavy trader, then an advance linked to turnover might work best. If you find you need to cover a cash flow gap or need funds to grow, then a Lula’s Cash Flow Facility is a trusted source of affordable capital.
Whichever option you land on, the goal is the same: funding that moves with how your business actually earns, so the next opportunity doesn’t have to wait for your cash flow to catch up.
