Understand

What you would actually hold

There is one question that decides everything else: what right do you acquire, against whom, and how does the underlying lending support it? Four answers cover the market.

Maintained by the Association’s editorsLast updated 18 September 2026

Read this and you can stop

Supplying capital to lending does not always mean entering the borrower’s credit agreement yourself. There are four positions you can be in:

Make a loan to a borrower. You enter into a loan agreement with the person or business borrowing the money.
Buy the rights to loan repayments. A lending business arranges a loan and lends the money to the borrower.
Lend to a lending business. You lend money to a business that uses it to make loans of its own.
Invest in a fund that makes loans. Your money joins other investors' money in a fund.

Each one puts you in a different place. In the first you are the lender. In the second you own the right to be paid. In the third the lending business owes you. In the fourth you own part of a fund. Knowing which one you are being offered is the single most useful thing on this page.

01 — Why it decides everythingThree questions, kept apart

Arrangements get described by mixing up three different things, and the mixture is where readers get hurt. This site keeps them separate:

What is being financed: A community scheme, a property development, a fleet of trucks, a solar project. That is the sector, and it tells you nothing about what you hold.
What you hold: One of the four above. This is the part that decides who owes you the money, and it is the subject of this page.
Who arranges and manages it: The people who find the borrower, draw the papers, collect the payments and chase arrears. One organisation often does several of those jobs, and doing them does not make it the owner of the loan.

02 — The four ways inThe detail, when you want it

Open the one you have been offered. Each starts with how it works and a real example, and keeps the legal terminology to the end. If you cannot tell which one you are being offered, that is the most useful question you can put to whoever is offering it.

Make a loan to a borrowerYou enter into a loan agreement with the person or business borrowing the money.Open

How it works

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.

An example

Lending against a property

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.

What you receive, and who manages it

A loan agreement in your own name, and any security registered in your favour. You are the lender. If you appoint somebody to administer it, they work for you and the loan stays yours.

What you are responsible for

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

The main 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.

Further detail — the legal position, in precise terms

What this is called: Originating a loan in your own capacity
What you hold: Rights under a loan you made to the borrower yourself, alone or alongside other lenders.
Who owes you: The borrower.
The distinction usually missed: 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.
Your own regulatory position: 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.

Questions to put to the documents

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?

Buy the rights to loan repaymentsA lending business arranges a loan and lends the money to the borrower.Open

How it works

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.

An example

Community-scheme lending through BC Funding Solutions

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.

ProLend and its consultants	Introduce clients to the opportunity and support their application.
BC Funding Solutions	Arranges and administers the community-scheme lending.
The private client	Supplies capital and acquires the loan claims described in their agreement.
The community scheme	Borrows the money.

Source: BCFS FAQ ↗ · Naming an organisation shows that the arrangement exists. It is not a recommendation, and it does not mean the Association has assessed them.

What you receive, and who manages it

The rights to repayments on a loan that already exists, set out in your agreement. The lending business normally continues to manage the loan, collect from the borrower and pass your share on to you.

What you are responsible for

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

The main 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.

Further detail — the legal position, in precise terms

What this is called: Acquiring an existing loan or receivable by cession
What you hold: Rights acquired through the sale and transfer, or cession, of a claim that already exists.
Who owes you: The underlying borrower, once the claim is validly transferred to you — not the seller.
The distinction usually missed: 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.
Your own regulatory position: Two conditions, and both have to hold. A person who acquires the rights of a credit provider **under a credit agreement the Act reaches** is within the Act's definition of a credit provider. So buying claims is not an automatic exemption from registration — but nor is it automatic registration. Where the original borrower is a juristic person at or above the section 7(1) threshold, or the loan to a smaller juristic borrower is a large agreement, the Act never reached that loan and there is no credit provider's rights under it to acquire. Establish the borrower before you worry about the duty.

Questions to put to the documents

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?

Lend to a lending businessYou lend money to a business that uses it to make loans of its own.Open

How it works

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.

An example

A note issued by a property lender

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.

Source: TUHF securitisation programme ↗ · Naming an organisation shows that the arrangement exists. It is not a recommendation, and it does not mean the Association has assessed them.

What you receive, and who manages it

An agreement with that business — often a note or a debenture — setting out what it owes you and when. The business manages its own lending, and you are relying on it to stay solvent as well as on its borrowers to pay.

What you are responsible for

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

The main 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.

Further detail — the legal position, in precise terms

What this is called: Funding a lending business or vehicle
What you hold: A loan to that business, or an instrument it issues to you — a note, a debenture or similar.
Who owes you: The entity or issuer. It is the primary debtor under your instrument; the underlying borrowers owe it, not you.
The distinction usually missed: 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.
Your own regulatory position: 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.

Questions to put to the documents

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?

Invest in a fund that makes loansYour money joins other investors' money in a fund.Open

How it works

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.

An example

A participation-bond scheme

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.

Source: Fedgroup Secured Investment ↗ · Naming an organisation shows that the arrangement exists. It is not a recommendation, and it does not mean the Association has assessed them.

What you receive, and who manages it

An investment in the fund — a unit, a share or a participatory interest, depending on how the fund is set up. The manager selects the loans, manages them, and handles what happens when a borrower stops paying.

What you are responsible for

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

The main 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.

Further detail — the legal position, in precise terms

What this is called: Investing through a fund or collective investment structure
What you hold: Whatever interest the structure confers — shares, units, a partnership interest, or a participatory interest in a collective investment scheme.
Who owes you: Nobody owes you repayment of the underlying loans. You hold an interest in the vehicle; the vehicle holds the loans.
The distinction usually missed: 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.
Your own regulatory position: 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.

Questions to put to the documents

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?

03 — Words with two meaningsClassify the rights, not the noun

Several words in this market carry more than one legal meaning, and the arrangement they describe can be materially different in each. Where you meet one of these, ask what rights you acquire and against whom.

Private lender, and credit provider

Private lender — a person or entity whose capital funds lending and whose return is the interest on it. A description of what somebody is doing, and it holds whether the agreement is in their own name or an administrator's.
Credit provider — a statutory status under the National Credit Act, attaching to whoever grants the credit under the agreement. A role with duties, not a description of a person.

The two are run together constantly, and they are not the same. You can be a private lender without being the credit provider — in South Africa that is the ordinary case, not the exception, because most capital reaches a borrower through an administrator or a fund that is the party on the agreement. It decides whose registration it is. It does not decide who the lender is.

Participation

A transfer of a share of a loan claim, so you hold part of the claim against the borrower.
A contractual entitlement against the participation provider, so you hold a claim against them and not against the borrower.
A participatory interest in a participation-bond collective investment scheme, which is a regulated collective structure.

Three different arrangements under one word. Ask which rights you acquire, and against whom.

Direct lending

A fund that originates loans directly to companies rather than buying them on a market. Professional usage.
A person lending in their own capacity, contracting with the borrower themselves.

An investor in a direct-lending fund does not personally contract with the underlying companies. Where the distinction matters, say “lend in your own capacity”.

Secured

A loan claim supported by registered security — a mortgage bond, a notarial bond, a cession.
A marketing adjective attached to an arrangement where the security stands in favour of somebody else.

The loan claim and the security supporting it are different things. Ask in whose favour the security is registered.

Administered

Somebody else services the loan you own.
Somebody else originates, owns and services the loan, and you hold a claim against them.

Administration describes how an arrangement is delivered. On its own it establishes nothing about what you own.

04 — What is being financedThe other dimension

Any of the four positions above can be taken in any of these sectors. What is financed drives the credit risk; what you hold drives your rights. Both matter, and they are not the same question.

Community-scheme finance. Funding bodies corporate and homeowners' associations, including cash-flow and capital-project needs.
Property and development finance. Debt financing property acquisition, development or refurbishment.
Business and corporate lending. Business borrowing for working capital, growth and other commercial needs.
Receivables, invoice and trade finance. Financing trade cycles, invoices, stock, imports and purchase orders.
Equipment and asset finance. Financing productive movable assets, including transport, construction and agricultural equipment.
Agriculture and agribusiness. Financing production cycles and agricultural businesses.
Infrastructure, energy and project finance. Lending to projects and project entities, including renewable-energy assets.
Acquisition, growth and mezzanine finance. Debt and hybrid structures used in business expansion and ownership transactions.
Non-bank consumer and microcredit. Lending to natural persons, including short-term and unsecured credit.

The market map sets each of them out with published evidence that the activity happens here.

05 — Adjacent marketsMarkets that sit next to this one

Bank lending: Deposit-funded credit extended by a licensed bank. A useful comparator, and not non-bank private lending.
Equity investment: Buying a share of a business and its upside. A lender is owed a debt; an owner is not.
Listed debt: Notes and bonds traded on an exchange. Listed instruments can fund private lending without themselves being private loans.

How the money moves works each position through as a worked example, naming the borrower, the creditor, the capital provider and the servicer where they differ. Regulation sets out when the National Credit Act applies and what registration actually turns on.

Step 2 of 6 · Start here

Who does what, and where does my money go?

Next: How the money moves →

Follow the capital from you to the borrower and back, and name who is responsible at each step. About 10 minutes.

← Back to 1. What private lending is