Small businesses in South Africa are kissing big banks goodbye

A chronic R300 billion funding backlog is pushing South African small businesses towards non-bank lenders as they prioritise quick access to capital to overcome cash flow pressures and avoid closure.

According to Chase Capital founder Kyndal White, many initiatives aren’t arriving fast enough to help South Africa’s small and medium enterprises (SMEs).

These include promised government grants, development loans, mentorship programmes, and private sector corporate enterprise supplier development (ESD).

This is exposing mid-market businesses to cash-flow problems at a time when macroeconomic pressures are already biting.

Read alongside data from Statistics South Africa, White said it paints a stark picture for the local business environment.

In the first quarter of 2026, a total of 377 liquidations were recorded, and corporate closures jumped by 15% year-on-year in March to 146 cases.

The financing, insurance, real estate, and business services sector experienced the highest number of liquidations, closely followed by the trade, catering, retail, and hospitality services sector.

“Mid-market companies usually operate on narrow margins, which makes them very vulnerable to cash flow interruptions,” White said.

“A large corporate may be able to wait 60 to 90 days for an invoice to clear, but smaller operators just don’t have that luxury.”

This applies across sectors. For example, he explained that many logistics operators are losing tenders because they cannot meet the fuel deposit requirements for a 30-day corporate contract.

“Similarly, property buyers are losing deals because the deadlines for their deposits arrive long before their approved funding does,” he said.

“And because they often don’t have property collateral, their applications for bridging finance are frequently declined by traditional banks.”

Alternative funding carries a higher cost of capital than traditional prime-linked bank loans, something which should, in theory, put businesses off.

However, White said business owners are recognising that missed opportunities or outright closures are far more expensive than short-term private credit. “Essentially, they’re choosing speed over lower interest,” he said.

A growing capital mismatch

Data from Trade & Industrial Policy Strategies show that formal small businesses generate roughly one-third (33%) of South Africa’s Gross Domestic Product, while the informal enterprise sector accounts for a little under 5%.

“And yet, according to Business Day, R12.4 billion in government invoices aren’t paid within the 30-day legal limit,” White said.

“Further, the International Finance Corporation said that despite South Africa having a sophisticated formal banking sector, only about 5% of small businesses can actually access traditional bank credit.”

White stressed that this operational mismatch is driving the rapid growth of South Africa’s private credit market.

“Non-bank financiers are filling the gap by providing products that focus on contract value, cash flows, and immediate operational needs rather than on asset-heavy balance sheets,” he said.

Instead of waiting for a liquidity crunch to force their hand, he said entrepreneurs are increasingly viewing alternative funding as a positive corporate strategy.

“Having pre-approved alternative credit lines in place before a cash squeeze hits means they will be able to bridge payment gaps, fulfil orders, and protect their working capital,” he said.

“The new thinking is to secure capital not as an emergency band-aid, but as a competitive advantage.”

Critical questions for SME borrowers

To navigate the evolving credit landscape successfully, White advised business owners to evaluate five critical criteria before applying for alternative funding:

• Is there an active cash plan? Funding without direction is a liability. A clear cash flow projection shows that the capital will be put to work with purpose.
• What exactly will the funds be used for? Knowing where the money is going shows financial discipline and gives an alternative funder confidence.
• What security can be put up? Tabling operational assets and contract values will set realistic expectations and speed up the assessment process.
• How will the loan be serviced? A funder wants to see that the repayment plan aligns with your cash flow cycle, factoring in seasonal dips or payment delays.
• What is the exit plan? Having a clear exit strategy, whether by completing a contract or selling an asset, is what separates businesses that use funding as a tool from those that become dependent on it.

Where banks rely on historical financials, strict committee cycles, and automated risk algorithms, alternative funders assess the actual person and the transactional data sitting in front of them, he said.

“When someone is under pressure, they don’t want to have to explain their situation to five different people in five different departments. They want one decision-maker who understands what they need,” he said.

As South Africa enters the second half of 2026, White said he expects non-bank liquidity to become increasingly entrenched in the economy.

“Traditional institutions will either have to accelerate their credit approval timelines and amend their assessment models, or risk losing a major part of the mid-market corporate banking market,” he said.