Tender & purchase-order finance
Also called tender funding: money against the contract you have won, rather than against three years of accounts.
The money goes out long before it comes in
Materials, labour and transport are all payable while the invoice sits in a client’s accounts department. Tender and purchase-order finance covers that stretch.
Winning the tender is the part everyone celebrates. Then the delivery schedule lands and you realise you need to pay suppliers in fourteen days against an invoice the client will settle in sixty. That gap sinks more small contractors than bad work ever does.
If the order you are funding came from a private buyer rather than a government tender, the assessment is different and so is the pricing — see purchase order funding.
How it is different from a business loan
An ordinary lender asks what your business did last year, then lends a multiple of it. If you have been trading eight months, or you turn over R60,000 a month and have just won a R2 million order, the answer is no — because the maths has nothing to do with the contract in your hand.
Tender and purchase-order finance asks a different question: who awarded this, are they good for the money, and can you actually deliver? A government department or a listed corporate on the other end of that invoice is often stronger credit than you are, and that is what gets funded.
What it pays for
- Suppliers and manufacturers, paid directly so stock is released
- Materials, plant hire and transport
- Labour and subcontractors for the delivery period
- Performance guarantees, where a lender on the panel offers them
What a lender will want to see
- The signed contract, award letter or purchase order
- Who the end client is and their payment terms
- Your supplier quotes, so the costing is real
- Business registration documents and bank statements
- Evidence you can deliver — experience, team, or a subcontractor who can
Where it usually goes wrong
Two things sink these applications. The first is a costing that does not survive scrutiny — margins that assume nothing goes wrong. The second is applying too late, once the delivery date is already close. Come to us the week you are awarded, not the week before delivery is due.
What it might cost
An indication before you speak to anyone, based on what the market publishes.
What moves the price
Who is paying you
The strongest driver by far. A national department and a small private buyer are priced completely differently, because the funder is really lending against them.
How long the money is out
Cost accrues over the funding period. An order delivered in three weeks and paid in thirty days costs a fraction of one that runs six months.
Your gross margin
Under about 20% there is little room for the cost of funding. Above 30% the deal carries it comfortably and more funders will compete for it.
Whether you have done it before
A repeat order for a buyer you have delivered to prices better than a first contract in a new sector.
An illustration, not a quote
How the numbers tend to work
Invented figures, to show the shape of a deal. Your actual cost comes from the funder in writing, and you see it before you commit to anything.
- Order you have been awarded
- R500,000
- What it costs you to deliver
- R375,000
- Your gross margin
- R125,000 · 25%
- Funded by the facility
- R375,000
- Cost of the finance
- a share of the margin
- What you keep
- the rest of it
Most tender and purchase-order funding in South Africa is priced either as a fee on the amount advanced or as a share of the profit on the deal, settled when your client pays. There is no published rate card anywhere in this market — including ours — because the price genuinely depends on the four things on the left. What we will not do is let you find out the number only after you have committed.
What we charge
Every fee we take, on one page, before you give us anything. Lender interest and lender fees are set by the lender on your deal and come to you in writing, in rands, before you accept any offer.
FEES at the top of gen.py and rebuild.| What | How much | On what basis | When |
|---|---|---|---|
| Eligibility check and first conversation | No charge | Free in every case, including when we tell you we cannot place the deal. | Never payable. |
| Funder commission | 1% – 5% of the amount advanced | Paid to us by the funder once your facility is drawn. Not deducted from your advance. We tell you the figure on your deal before you sign. | On drawdown, by the funder. |
| Broker / origination fee | 1% – 5% of the facility | Charged to you only where no funder commission is available on the route that suits you, or where the work is heavy relative to the deal size. | On drawdown. Never up front. |
| Company registration and compliance work | not yet set | Quoted as a fixed price in writing before any work starts. | On instruction. |
How we are paid, in full — including what we do about the conflict of interest that commission creates.
When tender finance is the wrong answer
The deals that do not place, and why. None of this is a secret in the industry; it is simply not usually written down where applicants can read it. The full set of conditions, with the numbers, is on what has to be true.
- The margin is too thin. Under about 10% gross there is not enough in the contract to carry the cost of funding at all. Between 10% and 20% it is placeable but fewer funders will look at it.
- The institution will not sign a cession. Most structures need the department to agree to pay the funder directly. If your buyer refuses, the deal usually will not place wherever you take it. Ask them early, not at the end.
- You have not been awarded yet. A quotation you are waiting on is not an asset. The day it is awarded, it is.
- The delivery is beyond your capacity. If the contract is several times anything you have delivered before, expect hard questions. Sometimes funding part of it is the honest answer.
- It is pure labour with no supplier invoice. Services-only contracts are harder to fund this way, because there is no stock and no supplier payment to structure around.
- You are already invoiced. Then ask about invoice discounting instead. It is usually cheaper and we would rather place you there.
Just been awarded something?
The earlier we see the contract, the more routes stay open.