There are many challenges that businesses face in South Africa. One of the biggest challenges is receiving a large purchase order from a customer and not having enough capital to fulfill it. In this case, your business may run into cash flow problems. One way to resolve this issue is through purchase order funding. Purchase order funding (or PO funding) bridges the gap between order and payment, and it is faster and easier to obtain than a traditional bank loan. This type of funding allows your business to pay suppliers for goods that you intend to resell or distribute to a customer who has completed a written purchase order. The funding is based on the creditworthiness of your buyer (customer) and your business.
Your purchase order funding facility will grow as your business grows. PO funding is an ideal way to help your business grow, without taking on bank debt or selling equity in your company. The more stable your purchase orders are, the bigger your line of credit can be.
To qualify for purchase order funding you must sell either finished goods, raw materials or components to Business to Business or Business to a Government Departments, with profit margins of over 20%. Goods must be “supply and delivery”. Delivery must be included by your supplier or outsourced by a reputable third party.
The Requirements for Purchase Order Funding
Businesses that may use PO funding include:
- Businesses with heavily seasonal sales patterns; as well as
- Businesses with tight cash flow that need to purchase materials before fulfilling orders.
At Dream Team Capital, we assist SMME’s with the developments for accessing funds needed to pay suppliers to fulfill orders, advancing the value of the PO before the customer pays the invoice. Our open-minded approach to PO funding means that we do everything possible to make your application a successful one. With our years of knowledge and industry expertise, we aim to make the entire process easier for South African businesses.
For more information on the process moving forward Contact Dream Team Capital