Businesses face one of the most difficult funding environments in recent memory. Across the globe, higher interest rates, inflationary pressures, and geopolitical tensions are squeezing traditional credit markets.
For many businesses, the immediate consequence has been curtailed investment and reduced risk appetite across the financial sector. Credit processes have become slower, more cumbersome, and increasingly restrictive. Even strong, profitable companies are struggling to secure the capital required to sustain operations or fund expansion. For mid-market businesses, securing capital at a fair cost has shifted from being a financial challenge to a strategic barrier to growth.
Locally, the impacts of weak GDP growth, failing infrastructure, and persistent political missteps erode investor confidence. These are exacerbated by existing structural weaknesses such as unreliable electricity supply, logistical bottlenecks, and a reliance on imported capital flows.
Businesses are left in a challenging, low-growth environment marked by higher uncertainty and fewer safety nets than seen during the pandemic years, a near impossible environment to navigate.
Why does conventional finance fall short?
Traditional lenders remain vital to the economy, but their models are often inflexible. With risk aversion on the rise, access to credit has tightened, trapping many businesses in cycles of delayed approvals, stringent collateral requirements, and rigid repayment terms, none of which are conducive to economic growth.
For instance, a mid-sized manufacturer seeking to upgrade production equipment may face a bank wanting immovable property as collateral, subjecting the application to multiple committee rounds, and insist on repayment schedules that do not reflect the seasonality of the cash flows. Once the facility is approved opportunities may have passed, leaving the client with delays and added costs.
Traditional institutions, driven by scale and efficiency, default to standardised products. This enables volume lending, but in practice, it often results in a square peg being forced into a round hole. The rigidity of conventional models can stifle rather than fuel growth, particularly when agility is most needed.
Investment should unlock business potential, not restrict it when it is most needed. Yet today’s lending environment threatens to do exactly that.
How does specialised finance address these challenges?
Specialised finance offers a different approach, designing bespoke funding solutions around the realities of each client’s industry and cash flow. Thus, partnering with businesses to access capital without over-leveraging traditional credit lines, helping businesses unlock liquidity from existing assets. This allows businesses to generate growth capital from what they already own.
An agribusiness might structure repayments to align with harvesting cycles, ensuring capital is repaid when revenue flows are strongest. A logistics firm could unlock value from its fleet of vehicles, using them as security in a structure that allows for fleet expansion without tying up all available cash. A renewable energy developer might finance new equipment in a way that mirrors the ramp-up of power generation capacity, smoothing the impact on cash flows.
Each of these examples reflects the central strength of specialised finance: flexibility. By tailoring structures to operating realities, businesses can continue to invest in equipment, upgrade their infrastructure, and expand their market share even in a risk-averse environment.
This approach does not eliminate risk but redistributes and manages it in a way that is sustainable for both financier and client. In doing so, specialised finance allows businesses to pursue growth at a time when conventional credit channels are pulling back.
Independence as an advantage
Independent providers are uniquely positioned to respond to these conditions with agility. Without the constraints of legacy models, they can focus on building solutions that align with long-term business strategies rather than short-term lending criteria.
Globally, independent financiers have played a critical role in filling funding gaps, particularly in mid-market and specialist sectors. Their ability to act quickly, customise structures, and adapt to changing conditions makes them valuable partners in volatile times.
At Merchant West, independence underpins this philosophy. As one of SA’s largest independent financial services providers, it’s able to assess opportunities through the lens of possibility rather than limitation.
The focus on specialised finance ensures that the solutions Merchant West designs are not only tailored to each client, but also align with their long-term ambitions. By working closely with clients to understand both their challenges and opportunities, it can structure finance that unlocks growth without adding unsustainable risk to stretched balance sheets.
Turning constraint into competitiveness
Tight credit and high borrowing costs may appear insurmountable. However, history shows that moments of constraint often spark innovation. Businesses that adapt, and financiers who are willing to reimagine how capital is deployed, are better positioned to seize opportunities quickly and remain resilient in the face of uncertainty.
Resilience defines South African businesses. At Merchant West, we channel that spirit into tailored solutions, combining determination, agility, and insight to support our clients, even in the toughest credit environment
— Matt Simpkins, MD of Merchant West Specialised Finance
For South African companies, the ability to remain competitive will increasingly depend on access to flexible funding models. Specialised finance can provide the bridge between today’s volatility and tomorrow’s growth enabling investment in equipment, infrastructure, and expansion that would otherwise stall.
The reality is that resilience will not come from waiting for the credit environment to improve, it will come from embracing capital solutions that go beyond conventional boundaries. Those businesses that are willing to explore these alternatives will be better equipped not only to survive the present conditions but to thrive when growth returns.
Looking beyond
The future of South African business is being shaped in boardrooms and factory floors. Companies that embrace flexible funding approaches will be the ones that venture into new markets, adopt new technologies, and build resilience against external shocks.
Financiers, too, have a choice. They can remain bound by rigid models that limit opportunity, or they can embrace approaches that reflect the realities of modern business. Specialised finance is not a silver bullet, but it represents a critical lever in building a more dynamic and competitive economy.
In this environment, resilience will belong to those businesses and financiers willing to think beyond traditional capital. That is both the challenge and the opportunity we face.
This article was sponsored by Merchant West.
