For many small and medium enterprises (SMEs) in South Africa, the biggest obstacle to growth is not a lack of customers — it is a lack of working capital. You win a large order, but you do not have the cash to buy stock or raw materials to fulfil it. Purchase order (PO) funding is a financing solution built specifically for this situation, and it is transforming how SA small businesses scale.
How PO funding works: When you receive a confirmed purchase order from a creditworthy buyer, a PO funder advances the cash you need to pay your suppliers directly. You fulfil the order, deliver to your client, and once your client pays, the funder deducts their fee and releases the balance to you. The entire cycle typically takes 30 to 90 days.
Who qualifies for PO funding? Unlike traditional bank loans, PO funding is primarily secured against the purchase order itself and the creditworthiness of your buyer — not your balance sheet. You typically need a confirmed, written purchase order, an identifiable and reliable supply chain, gross margins sufficient to cover the funding cost (usually 15% or more), and a track record of delivering similar orders.
PO funding vs traditional bank loans: Banks assess your business history, assets, and financial statements. Many SMEs — especially those trading for less than three years — cannot meet these requirements. PO funding focuses on the transaction, not the borrower's track record. This makes it accessible to younger businesses with strong orders but limited financial history.
The cost of PO funding: PO funding is more expensive than a standard business term loan, reflecting the higher risk and shorter duration. Fees typically range from 2% to 5% per month on the advanced amount. While this may seem high, the alternative — turning down a profitable order — is often far more costly in terms of lost revenue and damaged client relationships.
When PO funding makes sense: PO funding is ideal when you have a confirmed order with healthy margins, your buyer is creditworthy and pays within agreed terms, you need capital for stock or materials (not overheads), and the funding cost still leaves you with a meaningful profit. It is not suitable for speculative purchases, ongoing operational expenses, or orders where margins are razor-thin.
At Ndzinga Capital (NCRCP22167), our PO funding product is designed for South African SMEs that need to move fast when opportunity knocks. We assess applications within 48 hours, advance up to 80% of the PO value directly to your supplier, and work with you through the fulfilment cycle. If your business has orders it cannot afford to fill, get in touch with our business lending team today.
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