RM Capital Reveals What Makes a Purchase Order Fundable

When a growing company approaches RM Capital and asks it to settle a supplier against a confirmed order, a defined set of practical tests decides whether the deal goes ahead. RM Capital, a niche funder operating from Melrose Arch in Illovo, Johannesburg, has spelled out exactly what those tests are. The reminder lands as September pushes South African suppliers into the closing stretch of 2026, a stretch where orders have to be fulfilled before the December shutdown and where, for a great many firms, the obstacle has nothing to do with demand. What holds them back is the cash needed to buy stock before anything can be sold. RM Capital works with businesses in a wide spread of industries across South Africa and presents itself as a convenient alternative to mainstream banks for firms that cannot secure bank finance in the short term yet have the fundamentals in place to succeed over the long run.

What the facility actually covers

According to the company, Purchase Order Funding, also known to it as tender order funding, is a facility that lets a business pay its suppliers for goods it plans to resell or distribute to a customer who has issued a written purchase order. That difference is important. This is not a general working capital loan that arrives in a business account for open-ended use. The money is tied to one transaction, one order and one customer, and it pays the supplier so that the goods can be made, released or shipped.

It is precisely this structure that makes the facility workable for businesses a conventional lender would struggle to evaluate. A young firm with a slim balance sheet and no property to offer as security may nevertheless be holding a signed order from a major corporate buyer or a government department. The order is the commercial event under finance, and the standing of whoever issued it carries much of the risk.

The five steps the company works through

On its website RM Capital lays out its process across five stages. First the business submits the purchase order alongside its supplier documentation. Next it supplies its own business information for review. Where the transaction is approved, the business is notified. Factoring and guarantee agreements are then signed and the money is paid over to the supplier. Once the end customer pays the invoice, those proceeds meet the financing costs and whatever is left is passed on to the business.

Followed step by step, the sequence makes clear why the documents asked for at the outset are what they are. What the company requests is a copy of the purchase order or a signed appointment letter, the supplier agreement, a pro forma invoice or quotation, and general business information. Each of these describes the transaction rather than the applicant's track record, which fits a facility underwritten on the deal itself.

The tests that decide whether an order qualifies

The qualifying criteria the company publishes are precise enough to be helpful before any application is lodged. The goods have to be finished goods, raw materials or components being sold to a business to business customer or to a government entity. The transaction has to be a supply and delivery arrangement. The profit margin on the order needs to be above twenty percent. The end customer's creditworthiness is treated as critical, and the supplier's reputation and ability to deliver are examined too. Construction, cleaning and security services sit outside the scope of the facility.

These tests reward a close reading, since they account for most of the rejections a supplier is likely to meet when first approaching Purchase Order financing. An order carrying a thin margin cannot cover the cost of the funding and still leave the supplier ahead, which is the reasoning behind the twenty percent threshold rather than an arbitrary bar. A services contract has no goods for a supplier to be paid for, so there is nothing the facility can attach to. And a buyer with a shaky payment record endangers the whole transaction, because repayment depends on that buyer settling the invoice at the close.

Why the customer often matters more than the applicant

For a growth business, the single most important feature of the structure is that the assessment does not open with its own trading record. It opens with the order and with the party behind it. A supplier holding a firm order from a well rated corporate or a government department presents a lender with a very different risk profile than the same supplier handing over financial statements from a company that is only a few years old.

This is the space RM Capital says it was created to fill. Its clients are usually unable to secure bank finance in the short term, and the company casts itself as a funding partner rather than merely the other side of a transaction. Its website describes an approach grounded in a customised structure, insight and analytics, and it states that it works to deliver funding approval within time frames that make commercial sense, offering confidentiality, minimal paperwork and approval inside twenty four hours. It further states that it can fund up to the full cost of the purchase order.

Where the facility sits alongside the rest of the range

Order funding is only one of several facilities the company provides, and in reality a growing business tends to draw on more than one across a trading cycle. Invoice discounting and accounts receivable factoring free up cash already locked in issued invoices. Cashflow funding tackles short term working capital strain. Advocates accounts factoring serves advocates and other professionals, among them doctors, accountants, engineers and architects, whose fees are billed and then sit unpaid. Structured finance handles arrangements that do not fit any standard product.

Set out plainly, the path many suppliers take is simple. Order funding pays the supplier so the goods can be produced and delivered. That delivery raises an invoice. Where the terms on the invoice are long, discounting or factoring can unlock its value instead of leaving the business waiting for payment. Deployed together, the two facilities cover the two points in a trading cycle when cash sits furthest from the business.

What to compare when assessing the options

Suppliers sizing up Purchase Order Funding Companies tend to have a handful of practical questions. How fast can a decision come, and who makes it. What information has to be provided first. Whether the funder grasps the sector the goods move in, and whether it has backed transactions of a similar shape before. Whether the arrangement can be run again on the next order without repeating the assessment from scratch.

RM Capital emphasises that applicants deal directly with its decision makers. For a supplier working against a delivery date, that access is no mere courtesy. It marks the line between a query answered the same afternoon and an order slipping past the date on which it could still have been met.

Context heading into the final quarter

The timing of the reminder is no accident. From September on, South African suppliers are running against a squeezed calendar. Orders placed now require stock to be ordered, manufactured or imported, delivered and invoiced before the year end slowdown, and the lead times along that chain will not contract just because a business is short of cash. A supplier who grasps the qualifying tests ahead of time can gather the order, the supplier agreement and the pro forma invoice while the deal is still under negotiation rather than once the delivery date is already in jeopardy.

It also hands the supplier a firmer footing for negotiation. Knowing that an order's margin must clear twenty percent shapes how a quote is priced. Knowing that the end customer's credit standing is pivotal shapes which tenders are worth pursuing. These are commercial calls rather than financing ones, and they turn out better when the funding tests are understood as the order is being priced instead of weeks after the fact.

About RM Capital

RM Capital is a niche funder specialising in accounts receivable factoring, bridging and structured finance, together with other customised funding solutions for businesses across South Africa. Based at Melrose Arch in Illovo, Johannesburg, it offers purchase order funding, invoice discounting, cashflow funding, advocates accounts factoring and structured finance. The company states that across the past twelve years it has established itself as an alternative to mainstream banks and has directly funded over R400 million of deals, and that its directors bring more than fifty years of combined experience spanning investment banking, accounting and law. The National Credit Regulator logo appears on its website.

Suppliers who would like to review the full qualifying criteria and process themselves will find them on the RM Capital website at https://www.rmcapital.co.za/.