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Purchase Order (PO) Funding for Small Businesses

purchase order funding

What is Purchase Order (PO) Funding?

Purchase Order (PO) funding is a financial solution that helps businesses fulfill large customer orders by covering the costs of inventory or production. It is particularly useful for small businesses that lack the capital to purchase goods required to complete confirmed sales orders.

How Does PO Funding Work?

  1. Receive a Purchase Order – A customer places a confirmed order with your business.

  2. Apply for PO Funding – Submit the purchase order to a PO financing company.

  3. Approval & Supplier Payment – The funder evaluates the order and pays your supplier directly.

  4. Order Fulfillment – The supplier delivers goods to the customer.

  5. Invoice & Repayment – Once the customer pays for the order, the lender deducts their fees and releases the remaining funds to your business.

Benefits of PO Funding

  • Preserves Cash Flow – Enables businesses to accept larger orders without upfront capital.

  • No Collateral Required – Funding is based on the purchase order, not business assets.

  • Fast Access to Capital – Quick approval process to meet urgent demand.

  • Business Growth Support – Helps small businesses scale without financial constraints.

Potential Drawbacks

  • Higher Costs – PO financing fees may be higher than traditional loans.

  • Strict Approval Criteria – Funders typically require creditworthy customers and reliable suppliers.

  • Limited Use – Only applicable for businesses selling physical goods, not services.

How to Qualify for PO Funding

  • Have a confirmed purchase order from a reputable customer.

  • Work with a reliable supplier that can fulfill the order.

  • Show financial stability and ability to deliver on commitments.

  • Meet the minimum order value required by the PO funder.

PO Funding Providers in South Africa

1. Kenote Finance

Kenote Finance specializes in assisting SMEs and SMMEs with purchase order funding, offering quick approvals and competitive rates. They aim to support businesses in overcoming financial hurdles to fulfill large orders.

2. The People’s Fund

The People’s Fund provides purchase order funding with a focus on transparent, flat-fee pricing. They offer funding of up to R1 million, requiring a gross profit margin of at least 20%.

3. Sourcefin

Sourcefin offers end-to-end purchase order funding solutions, including supplier sourcing, logistical support, and project management. They cater to startups and SMEs, even those previously rejected by other funders.

4. RM Capital

RM Capital provides purchase order funding to businesses needing to pay suppliers upfront for goods intended for resale or distribution. Their services are designed to help companies fulfill large orders without straining cash flow.

5. PO Funding

PO Funding is a South African-based company that empowers small and medium enterprises by assisting with fulfilling purchase orders, ensuring businesses can meet client demands effectively.

6. FundingHub

FundingHub matches businesses with suitable purchase order financing options from a network of lenders. They offer transparent pricing and a streamlined application process to help SMEs access the funding they need.

7. Lula

Lula provides a Revolving Capital Facility, allowing businesses to access up to R5 million in funding within 24 hours. This service helps companies continue fulfilling orders even when cash flow is low.

8. Standard Bank in partnership with ProfitShare Partners (PSP)

Standard Bank has partnered with PSP to offer a purchase order funding solution for their business clients, providing financial support to fulfill large orders.

9. SMTAX

SMTAX offers purchase order funding solutions tailored for SMEs and aspiring entrepreneurs, with a focus on quick approvals and unlocking working capital for business growth.

These providers offer various services to assist small businesses in South Africa with purchase order funding. It’s advisable to review each option to determine the best fit for your specific needs and to understand their application processes and criteria.

Purchase Order funding is a valuable tool for businesses looking to take on larger orders without straining their finances. By leveraging PO financing, small businesses can grow, meet customer demands, and improve cash flow without taking on traditional debt.