Private lending is one of the oldest ways to put money to work, and one of the worst explained in South Africa. Most people have never had it described to them properly.
So — here it is.
When you put money into private lending, you are not buying a share of anything. You are a creditor. Somebody owes you a specific amount, under a written agreement, and usually there is something standing behind it.
You rank ahead of the shareholders. But a loan can never pay you more than the agreed rate. A share can multiply. A loan cannot.
Now — the question that decides almost everything else. And almost nobody asks it first.
Are you the lender? Or are you funding one?
Two ways in. You can be the lender on the agreement yourself — your name on the document, the borrower owes you directly. Or you can supply capital to a business that does the lending: an administrator, an originator, a fund.
In South Africa that second route is the common one. Far more people fund a lender than become one, and the two are not the same position.
Which brings us to the question everybody asks. Do I need to register with the National Credit Regulator?
The answer is not about how much you lend, or how often. It is about whether you are the credit provider.
If you are funding a lender — if the agreement is between that business and the borrower — then that business is the credit provider, and the registration is theirs to hold. Not yours.
If you are the lender on the agreement, the duty is yours. And then it depends on who is borrowing. Lend to an individual, and the National Credit Act covers it, at any size. Lend to a business with a million rand or more in assets or turnover, and it does not.
There is one more case worth knowing, because it catches people. If you buy the rights to somebody else's existing loan, the Act treats you as a credit provider too.
So the question is never simply: did I lend. It is: what, exactly, do I hold.
Which brings us to what stands behind the loan.
Property is what everybody pictures — a mortgage bond, registered at the Deeds Office. It is one part of this market, not the whole of it.
A loan can be secured over equipment or stock by a notarial bond. Over money owed to a business, by a cession of its invoices. By a person signing as surety — which is not security over a thing at all, but a second person to sue. Or by nothing, which is perfectly ordinary, as long as you knew.
And whatever form it takes: secured is not insured. It gives you a right to a process. What it is worth depends on what can be recovered, who ranks ahead of you, and how long it takes.
Here is the one that actually costs people.
A private loan is not an investment that matures. The date in the agreement is the date the money becomes due. It is not the date the money arrives.
An investment matures, and pays out. A loan falls due — and is then paid, or delayed, or restructured, or enforced.
Most have a shape rather than a term. If somebody quoted you an average, that is a fact about their past loans. Not a commitment about yours.
So. Four questions. They work whichever position you are in.
Who exactly owes me — and what is their name on a document?
What am I holding if they stop paying?
How do I get out, and what is the earliest realistic date?
And where does the return actually come from?
If any of those cannot be answered in writing — that is your answer.
All of it is set out in full, and free, on the Association's website.