How local private lending works in South Africa

Local private lending means placing capital as a loan into a South African lending environment — most often lending to community schemes, the body corporates that run sectional-title complexes, against levies their owners have fallen behind on. You earn interest, priced off the prime rate, for as long as the loan is outstanding.

A community scheme has bills to pay whether or not every owner pays their levy. When enough owners fall behind, the scheme has a real shortfall and a real claim against those owners. Private lending steps into that gap: capital is lent to the scheme, the arrear levy debt stands behind the loan, and the scheme repays as those levies are recovered.

That is what makes this different from an investment product. You are a lender. Your return is interest, and it is taxable as interest — BC Funding Solutions is not a deposit-taking institution and does not issue an IT3(b) certificate.

Pricing

Prime-linked — SA prime plus a margin

Currency

Rands

Term

None — no maturity date

Repayment

As community schemes repay

Ways in

A single amount, or monthly from R1,000

Administered by

BC Funding Solutions · NCRCP 11132

There is no fixed term, and nothing matures. This is the point most people get wrong on first reading. A local loan asset is not a note with an end date — capital returns as the underlying loans are repaid, which depends on the schemes and the recovery of the levies behind them. It is capital that should not be needed back on a date certain.

What prime-linked actually means

A prime-linked return is quoted relative to the prime rate rather than as a fixed number — prime plus a margin. When the Reserve Bank moves the repo rate, prime moves with it, and a prime-linked return moves too.

That cuts both ways, and it is worth being plain about it. When rates rise, the return rises. When rates fall, it eases. What it gives you is a return that reflects current conditions rather than one locked to a number set years ago. Over a full rate cycle, the movements tend to average out. Prime-linked, explained in full.

What shapes your return

  • The prime rate. The base everything is priced from. It changes only when the Reserve Bank's Monetary Policy Committee moves the repo rate — a handful of scheduled dates a year, and only when they act.
  • The margin. Fixed per product, added on top of prime.
  • How long the capital stays in. There is no term, so this is a function of when the underlying loans are repaid rather than a date you pick.
  • Whether you add to it. A monthly contribution keeps adding capital that starts earning from the point it is deployed.

Who local lending suits

It suits capital that has no date attached to it — money you are not relying on for a specific purchase in a specific month. It suits someone who wants a return that tracks South African rates and who is comfortable that access depends on repayment rather than a maturity date.

It suits less well if you might need the capital back at short notice, or if you want the return fixed regardless of what interest rates do. If a fixed rate and a known end date matter more to you, that is what the offshore notes are.

Model it, then talk it through. The calculator above gives an indicative view at the current prime rate. A consultant will work through your own numbers with you and answer the questions a calculator cannot.

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