Business jargon has a way of creeping into everyday conversation, especially in finance. Words like “Working capital”, “Trade Finance” or “venture capital” get used so often that we assume everyone knows what they mean, yet very few entrepreneurs have had them properly explained in a practical, real-world way.
So let’s break it down simply.
Imagine you are a South African entrepreneur. You’ve built a business from the ground up. It’s no longer just surviving it’s growing. It’s starting to become a serious part of your long-term wealth-building journey. New contracts are coming in, your team is expanding, and opportunities are opening up.
Now the big question becomes: How do you fund this growth without putting the business under strain?
That’s where discussions around your “Capital Stack” comes in.
What is your so-called “Capital Stack”?
A Capital Stack is simply the combination of different types of funding that support your business, layered according to risk and cost. Just like a tech company has a software stack, an entrepreneur has a capital stack, a mix of capital sources that work together to fund operations and growth.
At the foundation of most businesses is Working Capital, the money that keeps the lights on: paying staff, buying stock, covering rent, and managing day-to-day cash flow. In South Africa, where many corporates and public sector clients pay in 30, 60 or even 90 days, access to working capital facilities can be the difference between scaling smoothly and constantly firefighting cash flow gaps.
As the business grows, other layers are added:
- Trade Finance / Trade Credit – funding that helps you pay suppliers and import goods while waiting for customers to settle their accounts.
- Supply Chain Finance / Invoice Finance – unlocking cash from unpaid invoices so that growth is not limited by slow-paying customers.
- Term Debt – longer-term loans for equipment, expansion, or infrastructure.
- Equity and Venture Capital – funding in exchange for ownership, often used to accelerate high-growth businesses.
- Enterprise and Supplier Development (ESD) – these form part of the B-BBEE scorecard and allow for a combination of grants and soft-loans to help capacitate early stage businesses
- DTIC grants and incentives – these are incentives out of the Department of Trade, Industry and Competition (DTIC) which aim to drive transformation of the South African business landscape.
Each of these forms part of the overall capital stack, with different levels of risk, cost, and control.
Is it possible to access Working Capital quickly in South Africa?
Being such a critical component of the Capital Stack, access to working capital is a question we are regularly fielding.
“Where can I access Working Capital quickly?” is a question we often field.
For entrepreneurs looking for access to between R25 000 and R5m, two of the South African fintech businesses that we work with are:
- LulaLend who provides fast and flexible business funding to SMEs and sole traders that traditional lenders often can’t serve. You can apply online and get a response with 72 hours
- Bridgement offer Business Loans, Lines of Credit, Invoice Finance and Trade Credit amongst other solutions. Setup your free Bridgement account here.
Where does Venture Capital fit in?
The subject of “Venture Capital” is quite topical at the moment in South Africa as the Minister of Small Business has recently returned from Davos and challenged the Venture Capital sector to unlock early stage funding for entrepreneurs.
For innovative, fast-scaling companies, Venture Capital can provide not only funding, but also strategic guidance, networks, and market credibility.
South Africa has a very under-developed and conservative Venture Capital market and many entrepreneurs in our network will spend an inordinate amount of money pursuing VC funding.
However, it comes with trade-offs: dilution of ownership and, sometimes, pressure for rapid returns. That’s why venture capital should be a deliberate layer in the stack, not the first solution for every business challenge.
Why is it important for entrepreneurs to understand their “Capital Stack”?
Many entrepreneurs think funding is just about “getting money in”. In reality, it’s about structuring the right mix of money at the right cost
Too much short-term debt can choke cash flow.
Giving away equity too early can limit long-term wealth.
Not using tools like supply chain finance or invoice finance can leave growth trapped in unpaid invoices.
A well-designed capital stack allows you to:
- Fund day-to-day operations through working capital.
- Smooth cash flow using trade finance and invoice finance.
- Support expansion without over-stretching the balance sheet.
- Bring in equity or venture capital only when it truly adds strategic value.
And importantly, your capital stack is not static. It evolves with your business – from bootstrapping, to structured working capital, to trade finance, and eventually to growth capital and venture investment.
Building a Capital Stack for South African entrepreneurial realities
In South Africa, businesses operate in a unique environment: long payment cycles, volatile input costs, and infrastructure pressures. This makes smart use of working capital, supply chain finance, and trade credit essential components of a sustainable growth strategy – not just optional extras.
Understanding how these layers fit together empowers entrepreneurs to negotiate better terms, protect ownership, and build businesses that are not only profitable, but financially resilient.
Work with an experienced team to help you build your Capital Stack
If you need assistance in developing your capital stack, our advisory team has 70 years of combined experience in capital raising, having assessed over 2,500 businesses, with an average capital raise of R120 million and a 95% success rate.
We’re on hand to support you in structuring the right mix of working capital, trade finance, supply chain finance, and growth capital to accelerate your journey.
If you would like to chat to one of our team, please do not hesitate to contact us.
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