The secret to SMME growth: Turning purchase orders into opportunities
Eight reasons why Old Mutual’s SMEgo is a game-changer for small businesses
In February 2023, the Department of Small Business Development issued the National Integrated Small Enterprise Development strategic framework, an updated integrated national strategy to support and develop small enterprises.
The framework leans on partnerships to support and develop small enterprises and advance economic recovery, growth and job creation. The adherence to government practices for ease of doing business for small, medium and micro enterprises (SMMEs) ensures there is a focus on sector parameters, and municipal, provincial and national government authorities.
As a catalyst for growth, purchase order (PO) financing is a frequently used alternative funding instrument for businesses, including startups and SMMEs that need innovative funding solutions. This approach encourages financial inclusion and aims to support SMMEs’ sustainable participation in economic growth, particularly for cash flow increase and expansion.
Here are eight reasons why PO financing encourages the growth of the SMME sector in SA:
- Cash flow: PO financing enables SMMEs to maintain a consistent cash flow without waiting for customer payments.
- Access to capital: Business expansion is enabled with capital for large orders as opposed to use of own funds.
- Flexibility: Businesses can increase operations in response to demand without experiencing financial strain.
- Risk mitigation: Businesses can lower their risk of cash flow issues brought on by late payments or unforeseen expenses by financing the production of goods.
- Improved supplier relationships: PO financing can assist companies in making on-time payments to their suppliers, improving relationships and possibly resulting in better terms or discounts.
- Fast turnaround for funding: PO financing processes are quicker than traditional loans, and the procedure enables SMMEs to seize opportunities promptly.
- Risk mitigation: Businesses can lower their risk of cash flow issues brought on by late payments or unforeseen expenses by financing the production of goods.
- Boost growth: SMMEs can grow by accepting larger orders or new customers without being concerned about their finances.
The above seeks to counter the obstacles restricting SMMEs from expanding rapidly into new markets and gaining a competitive advantage over larger, more established businesses including capital difficulties and limited financial resources. Considering the disparities between POs and a robust contract, the parties involved must ensure the contract measures the advantages and disadvantages. Importantly, legal considerations specific to the project requiring funding are considered to avoid future conflict.
SMEs looking to expand, benefit from SMEgo’s efficient processes and finance solutions
Old Mutual leverages its fintech solution, SMEgo, as a platform that supports small and medium enterprises (SMEs). PO financing is one of the funding instruments offered within its suite of services, providing the added advantage of quick access to cash. SMEs looking to expand benefit from SMEgo’s efficient processes and finance solutions.
In addition to easy access to capital, SMEs within Old Mutual’s SMEgo ecosystem have the advantage of managing the financial risks associated with fulfilling large orders, as funds are specifically allocated for such purposes.
Through PO financing, a central aspect of SMEgo’s value proposition is its capability to provide SMEs with access to up to R10m in capital via its platform. This support ensures they can afford essential expenses like equipment, inventory and labour, effectively acting as a valuable credit line.
The expanded funding portfolio, bolstered by the PO financing service, lays a foundation that ensures that SMEs have access to the necessary capital to support and sustain their operations.
To apply for purchase order financing visit smego.co.za.
This article was sponsored by Old Mutual.
Old Mutual SMEgo is brought to you by Old Mutual Corporate Ventures, a company in the Old Mutual Group. Ts & Cs apply.