How to start a cash loan business in South Africa

Starting a cash loan business in South Africa can put you in a very vital position in society. A position where people tend to turn to you for financial service in an emergency. Play your cards right and you just might be the best option for credit service within and beyond the society, you operate in. Through the course of this article, we will be looking at the key bricks to starting up a loan business in South Africa. Read tight!!

What is a Cash Loan?

cash loans

Before starting a business of any kind, it is important you have at least a brief insight of what the service you’re about to provide means. We can see cash loans as a type of credit vehicle in which it lends an amount of money to another party in exchange for future repayment. In most cases, the lender also charges interest or additional fees to the principal value. The borrower is meant to repay besides the principal balance.

How does a Cash loan company make money?

Cash lenders make money by charging people interest on their loans. Interest might vary depending on some factors. You may lend out R500 at a 20% interest rate. This means the debtor will owe R600 by the time they conclude the transaction. Interest might vary depending on some factors. Some of these factors include your credit score, the loan amount itself, the cost of operation, and others.

Read more  Payday Loans

8 steps to starting up a successful Cash loan business in South Africa

Without mincing too many words, let’s break down the magic 9 steps in setting up a loan business in South Africa. We have taken our time during the course of this research to consider all the options and loopholes, so consider every step solid.

Step 1 – Plan your Business

Nothing is as essential for the success of a business as a simple plan. It helps you map out the specifics of your business and also discover some unknowns. We see a few important questions to be considered during planning below;

  1. What is the startup cost?
  2. What is the operational cost?
  3. How much can you charge customers?
  4. Who is the target market?
  5. What will you name your business?

Step 2 – Form a legal entity

Establishing a legal business entity such as an LLC or corporation makes you distinct from your firm. It protects you from being held personally liable if someone sues your lending company.

Step 3 – Register for Taxes

It is also important that you register for a variety of state and federal taxes before you can open your business. You must register within 60 days after starting your business by completing an IT77 form.

You can get this form from your SARS branch or you can register for eFiling on

Step 4 – Open a business bank account

Using dedicated business banking and credit accounts is very essential for personal asset protection. When your personal and business accounts are mixed, your personal assets and other valuables are at risk in the event someone sues your business. In business law, they refer to this as piercing the corporate veil.

Read more  How to Transfer Student Loans to Another Lender

Step 5 – Set up business accounting

Expenses and sources of income need to be recorded in order to adequately understand the financial performance of your business. Also, keeping accurate and detailed accounts greatly simplifies your annual tax filing. You might also need a business loan.

Step 6 – Get a business insurance

Your business needs insurance in order to operate safely and lawfully. Business insurance protects your company’s financial wellbeing in the event of a covered loss.

There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, go with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.

Step 7 – Define your business

Your brand is what your company stands for. This involves your morals, ethics as well as how your business is perceived by the public. A strong brand reputation will help your business stand out from other competitors. Two major questions are to be considered at this stage;

  1. How best to serve your target market
  2. Keep customers coming back
  3. How to promote & market a micro-lending company

Step 8; Establish web presence for your Cash loan business in South Africa

A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.


This business is excellent for not just anyone but those who understand the power of responsible lending. This isn’t charity, but it is giving someone else a helping hand when they need it the most. The successful lender will need an excellent balance between helping others and remaining financially solvent.

Read more  What is a Direct PLUS loan?