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Government Purchase Order Finance

Government Purchase Order Finance is a financing option in which Suppliers, that lack cash flow, secure the necessary capital to fulfil large purchase orders from Government entities. The Applicant/ Supplier will use the purchase order as collateral to obtain funds to cover the materials, labour, and other expenses needed to complete the order from Government. This type of funding helps Suppliers meet Government contract obligations without financial strain, allowing them to maintain operations and grow without the delays that can come from traditional financing methods.

The Process

  1. Purchase Order provided to the Supplier by its Government client
  2. Supplier applies for Purchase Order Funding through Finance Originators by completing the online application.
  3. A due diligence on the Purchase Order, Supplier, and transaction is completed by the Lender.
  4. If approved, Finance Originators arranges the necessary agreements for the Supplier to sign with the Lender.
  5. The Supplier cooperates to ensure that all security measures imposed by the Lender are met and implemented.
  6. Finance Originators arranges for direct payment by the Lender to the Supplier(s) of the goods.
  7. The Supplier together with Lender ensures that the supplier and sub-suppliers, supply the goods timeously.
  8. The Lender confirms that the client arranges and accepts the delivery of the goods.
  9. When the payment for the transaction is received the Lender is paid its percentage of profit as per the agreement.

Minimum Requirements:

  • The Gross Profit on the Purchase Order should be more than 30%.
  • Value of the Purchase Order must exceed R300 000.00
  • The Purchase Order should be from a Government institution or Parastatal.
  • The delivery date required by the Purchase Order should be reasonable to allow enough time for the finance to be arranged and for the supplier to complete the order.

Purchase Order Funding Rates
The unique merits of each transaction are considered but as a rule of thumb the Lenders charge between 25% to 35% of the Gross Profit on each Purchase Order.