{ "name": "Legal positions in South African private lending", "description": "The four positions a capital provider can be in when supplying capital to lending — making a loan, buying the rights to repayments, lending to a lending business, and investing in a fund — with the debtor, the distinction most often missed, and the regulatory consequence of each.", "version": "2.0", "modified": "2026-09-18", "publisher": "Private Lending Association of South Africa", "source": "https://privatelendingassociation.co.za/data/positions.json", "licence": "CC BY 4.0", "licenceUrl": "https://creativecommons.org/licenses/by/4.0/", "citation": "Private Lending Association of South Africa, \"Legal positions in South African private lending\", version 2.0, 2026-09-18.", "count": 4, "data": [ { "id": "originate", "name": "Make a loan to a borrower", "legalName": "Originating a loan in your own capacity", "howItWorks": [ "You enter into a loan agreement with the person or business borrowing the money.", "You can arrange it yourself, or have professionals help you.", "The borrower repays you, with interest, on the terms in that agreement." ], "whatYouHold": "Rights under a loan you made to the borrower yourself, alone or alongside other lenders.", "whoOwesYou": "The borrower.", "distinctionOftenMissed": "An arranger, originator or servicer can find the borrower, paper the loan and collect the instalments without ever owning the loan. Somebody else doing the work does not make them the creditor, and it does not stop you being one.", "regulatoryPosition": "You are the credit provider. If the National Credit Act applies to the agreement, the registration duty is yours — it is not answered by somebody else in the chain holding a registration. The prescribed registration threshold is R0.", "responsibilities": [ "Deciding whether to lend, and on what terms", "Making sure the agreement and any security are properly drawn and registered", "Your own position under the National Credit Act, if it applies to the agreement", "Enforcing the loan, or instructing somebody to, if the borrower stops paying" ], "risks": [ "The borrower cannot pay. This is your loss, and there is nobody between you and it.", "The security is worth less than expected, or was never properly registered in your name.", "Enforcement takes time and costs money, and comes out of what you recover.", "Your money is committed for the term. There is usually no way to get out early." ], "questionsForTheDocuments": [ "Whose name is the credit agreement in?", "If the loan is secured, in whose favour is the bond, cession or notarial bond registered?", "Who may vary, waive or enforce the loan, and do you have to agree first?", "What happens to your loan if the administrator fails?" ], "example": { "title": "Lending against a property", "body": "A business needs R2 million for eighteen months and offers a bond over a commercial property. Your attorney draws the loan agreement and registers the bond in your name. The borrower pays you interest monthly and repays the capital at the end of the term. You may pay somebody to collect the payments and keep the records, and that does not change who owns the loan — you do.", "parties": null, "source": null } }, { "id": "acquire", "name": "Buy the rights to loan repayments", "legalName": "Acquiring an existing loan or receivable by cession", "howItWorks": [ "A lending business arranges a loan and lends the money to the borrower.", "It then sells you the rights to some or all of the repayments on that loan.", "It usually carries on managing the loan and collecting from the borrower." ], "whatYouHold": "Rights acquired through the sale and transfer, or cession, of a claim that already exists.", "whoOwesYou": "The underlying borrower, once the claim is validly transferred to you — not the seller.", "distinctionOftenMissed": "Buying a borrower-facing claim is not the same as receiving a promise from the seller that you will be paid a return. In the first you own the claim; in the second you are a creditor of the seller. Read which one the agreement actually does.", "regulatoryPosition": "A person who acquires the rights of a credit provider is within the National Credit Act's definition of a credit provider. Buying regulated claims is not an automatic exemption from registration.", "responsibilities": [ "Reading the agreement closely enough to know what you are buying", "Establishing whether you are buying the claim itself, or only a promise of a return from the seller", "Establishing whether any security supporting the loan comes with it", "Keeping your own records of what you paid for and what you are owed" ], "risks": [ "The borrower stops paying. Whether you can do anything about it depends on what you bought.", "The lending business fails. If you hold a promise from them rather than the claim itself, you are one of their creditors.", "The security stays registered in the lending business's name, so you cannot enforce it yourself.", "The transfer of the claim was never properly completed, so on paper you may not own what you think you own." ], "questionsForTheDocuments": [ "Does the agreement transfer the claim, or only promise you a return out of it?", "Has the cession been perfected, and does the borrower have to be notified?", "Do the security rights supporting the claim pass with it?", "If the borrower defaults, do you have recourse to the seller, or only to the borrower?" ], "example": { "title": "Community-scheme lending through BC Funding Solutions", "body": "A sectional-title body corporate needs money for a roof before its levies come in. BC Funding Solutions arranges and administers the loan to the scheme. A private client supplies the capital and acquires the rights to the repayments, under what BCFS calls a Sale of Claims agreement. ProLend and its consultants introduce clients to the opportunity and help them through the application; they do not lend the money and do not administer the loan.", "parties": [ { "who": "ProLend and its consultants", "role": "Introduce clients to the opportunity and support their application." }, { "who": "BC Funding Solutions", "role": "Arranges and administers the community-scheme lending." }, { "who": "The private client", "role": "Supplies capital and acquires the loan claims described in their agreement." }, { "who": "The community scheme", "role": "Borrows the money." } ], "source": { "name": "BCFS FAQ", "url": "https://www.bcfundingsolutions.co.za/faq/" } } }, { "id": "fund-a-vehicle", "name": "Lend to a lending business", "legalName": "Funding a lending business or vehicle", "howItWorks": [ "You lend money to a business that uses it to make loans of its own.", "Your agreement with that business sets out how and when it must repay you.", "The people it lends to owe the business, not you." ], "whatYouHold": "A loan to that business, or an instrument it issues to you — a note, a debenture or similar.", "whoOwesYou": "The entity or issuer. It is the primary debtor under your instrument; the underlying borrowers owe it, not you.", "distinctionOftenMissed": "Your risk is the entity's, not only the loan book's. Guarantees and security can add rights against other parties, and limited-recourse wording can subtract them — both belong in the instrument, not in the brochure.", "regulatoryPosition": "Raising repayable money from the general public engages the Banks Act. A note or debenture may also be a security, which brings its own consequences for anyone advising on it or marketing it.", "responsibilities": [ "Working out what the business actually owns and how it makes money", "Understanding where you rank if the business runs out of money", "Knowing whether anything secures your agreement, and what", "Monitoring the business, not only its loan book" ], "risks": [ "The business fails. Its borrowers can all be paying and you can still lose money.", "Your recourse is limited to a defined pool of loans, and that pool underperforms.", "Other creditors rank ahead of you.", "Your money is locked in for the term of the instrument." ], "questionsForTheDocuments": [ "Which legal entity issued the instrument, and what does it own?", "Is recourse limited to a defined pool, or does it extend to the issuer generally?", "Where do you rank against the entity's other creditors?", "Is there security, a guarantee or a trustee acting for holders?" ], "example": { "title": "A note issued by a property lender", "body": "A property lender raises money to fund its loan book and issues notes to the people who supply it. An investor subscribes for a note and is paid interest by the issuer. The borrowers pay the issuer; the issuer pays the investor. TUHF's published securitisation programme sets out exactly this shape, naming the issuer, the originator and the servicer separately, and stating what recourse the noteholders have.", "parties": null, "source": { "name": "TUHF securitisation programme", "url": "https://tuhf.co.za/wp-content/uploads/2026/07/Mortgage-Loan-Backed-Securitisation-Programme.pdf" } } }, { "id": "fund-interest", "name": "Invest in a fund that makes loans", "legalName": "Investing through a fund or collective investment structure", "howItWorks": [ "Your money joins other investors' money in a fund.", "The fund's manager chooses which loans to make and manages them.", "You hold an investment in the fund, and the fund holds the loans." ], "whatYouHold": "Whatever interest the structure confers — shares, units, a partnership interest, or a participatory interest in a collective investment scheme.", "whoOwesYou": "Nobody owes you repayment of the underlying loans. You hold an interest in the vehicle; the vehicle holds the loans.", "distinctionOftenMissed": "Your interest and the portfolio's loan assets are two separate levels of the same structure. A fund that originates loans directly to companies is often called direct lending — that describes what the fund does, not a contract between you and those companies.", "regulatoryPosition": "Collective investment schemes and the advice given about them are regulated. FAIS addresses advice and intermediary services in respect of defined financial products, which include relevant securities and collective-scheme interests.", "responsibilities": [ "Understanding what you hold and how it is valued", "Knowing what fees are taken, and at which levels, before anything reaches you", "Knowing how and when you can get your money out", "Checking who manages the fund and under what authorisation" ], "risks": [ "The loans in the fund underperform, and the value of your investment falls.", "Withdrawals are gated, suspended or paid late when many investors want out at once.", "Fees at several levels reduce what reaches you.", "The manager makes poor lending decisions, and you have no say in them." ], "questionsForTheDocuments": [ "What exactly do you hold — a unit, a share, a participatory interest?", "Who manages the structure, and under what authorisation?", "How is the interest valued, and can it be gated, suspended or redeemed late?", "What fees are taken before anything reaches you?" ], "example": { "title": "A participation-bond scheme", "body": "Fedgroup Secured Investment is described as a collective investment scheme administered by Fedgroup Participation Bond Managers. An investor's money is pooled with others', and the manager lends it against property. The investor holds an interest in the scheme — they are not personally making each loan, and they do not contract with the individual borrowers.", "parties": null, "source": { "name": "Fedgroup Secured Investment", "url": "https://www.fedgroup.co.za/investments/secured-investment" } } } ] }