Use Cases: How Loans Against Business Vehicles Can Help SMEs

business vehicles

There are many scenarios when loans against business vehicles are ideal for start-ups and small businesses.

These three use cases outline the efficacy of vehicle-backed loans in the small business environment.

Use Case 1: start-up leverages assets to meet payroll

Description: a booming tech start-up solves its cash-flow crisis through the strategic use of the company’s delivery vans.

Use case: successful Cape Town-based tech firm Strateyze is on a rapid upward growth trajectory. CEO James Burton recently announced a ground-breaking agreement with the privately owned Excellence Academy schools and colleges.

The deal, which sees Strateyze become the sole supplier of all learning software to the group, was signed off last week.

In a blow to liquidity, two key clients are forced to delay payments to the company as a result of COVID-related logistics backlogs.

The unexpected disruption to the normally healthy cash flow means Burton has to look elsewhere for funding to cover the payroll. He makes the strategic decision to use the company’s fleet of delivery vans to secure a short-term loan.

Once the outstanding accounts are settled and the loan repaid, the vehicles are back doing what they do best – delivering software packages and hardware to clients.

Use Case 2: commercial vehicles support tender bid

Description: a Johannesburg trucking company uses an asset-based loan to scale up its fleet management software – and win a nationwide tender.

Use case: black-owned small fleet trucking company Best Yet Freight is on the cusp of securing a lucrative tender.

The successful bidder is expected to deploy the latest fleet management software to consistently manage the performance of the fleet.

The capital expenditure required to pay for software that can automate and track dispatch, routing, load optimisation, fleet management and maintenance is not readily available.

CFO Samuel Kleynhans decides to use three of a fleet of 15 heavy commercial vehicles to secure a short-term loan.

The move pays off. Best Yet Freight is the selected bidder to deliver road marking paint and street light fittings to road construction sites throughout South Africa.

Use Case 3: SME exploits inventory deal

Description: the owner of an established workwear manufacturing company raises the capital required to pay for inventory using his private luxury car as collateral.

Use case: owner of Urban Workwear & Accessories Silumko Ndlovu is poised to take advantage of a once-in-a-lifetime opportunity. The company’s core competitor in Gqeberha announces it’s closing its doors and selling all inventory at below cost.

Urban Workwear & Accessories, which has battled the headwinds caused by recurring COVID-related lockdowns, has liquidity issues. There are insufficient funds in the business to cover the costs of the cut-price inventory.

Rather than missing out on the lucrative transaction, Ndlovu collateralises his BMW xDrive Coupé.

In exchange, he uses the vehicle-backed loan to buy the inventory and sells it at more than five times the asking price.

With capital in hand, Ndlovu pays off the loan in full and takes possession of his luxury car. As the loan is taken through a reputable credit provider, no early settlement penalty is added to the total debt.

Where to get a small business vehicle-backed loan in South Africa

With Pawn My Car, you can use a car, bakkie, truck or boat that’s in your name or your business’ name to secure a loan quickly and easily, with no delays or laborious paperwork.

For more information, contact us on 0861 112 866 or simply complete and submit our online application form.

Pawn My Car is a division of a registered credit provider with branches in Cape Town, Johannesburg, Durban and Gqeberha.

Complete an application now

APR & Loan period

Fixed rates range from 36% to 60% APR and payment options range from minimum 3 to maximum 24 months. Apart from the initiation and monthly fees shown below, the only additional fee is credit life insurance if the borrower does not have this already.

Renewals

All accounts may be renewed if they are up to date.

Collection

All payments are made via EFT or direct deposits into Lamna’s bank account. There are no debit orders.

Non-payment

Non-payments may result in the matters being escalated.

Illustrative example

Client borrows R10,000 for 90 days.

Loan
Amount
Repayment Period
Monthly Repayment
Total Cost of Loan
Initiation
Fee
Monthly Fee
(Interest + Service Charge)
APR
Loan Amount

R10,000

Repayment Period

3 months

Monthly Repayment

R560

Total Cost of Loan

R12,370

Initiation Fee

R1,000

Monthly Fee (Interest + Service Charge)

R650

APR

60%