RM Capital Explains How It Pays Suppliers Directly to Get Orders Moving

Winning a purchase order is only half the battle for many South African growth businesses. The other half is the supplier. A manufacturer or wholesaler that needs payment before it will produce or release the goods can stop a confirmed order in its tracks, especially when the business that won the order is still waiting to be paid on its last one. RM Capital, the niche funder based at Melrose Arch in Johannesburg, is focusing this November on the supplier side of the deal, and on how its funding puts money in a supplier's hands so that goods can move.

The end of the year sharpens the problem. Customers place orders to be filled before the holiday shutdown or at the start of the new year, and suppliers want certainty before committing stock and production time. A business that cannot pay upfront risks losing its place in the queue.

Paying the supplier, not lending to the business

Purchase Order Funding from RM Capital allows a business to pay its supplier upfront for goods it intends to resell or distribute to a customer who has issued a written purchase order. The funding lets the supplier deliver or manufacture the goods before the business receives payment from its customer.

What makes this different from a bank loan is the way it is structured. Most often, the funding is set up as an invoice factoring transaction. Factoring is not a loan. RM Capital purchases the rights to the payment that will be received from the customer. On that basis, RM Capital pays the suppliers directly or provides payment guarantees. The business does not take on bank debt and does not give up equity in the company.

For the supplier, this means dealing with a funder that is committed to the transaction. Whether it receives payment upfront or a payment guarantee, the supplier has the assurance it needs to release goods or begin production. For the business, it means it can accept larger orders and increase its sales without first having the full cost of the goods in the bank.

Up to the full cost of the order

RM Capital finances up to 100% of the purchase order costs. When the customer pays the invoice, that payment is used to settle the funding and its costs, and the business receives the difference. In practical terms, the business keeps its margin on the deal while RM Capital carries the cost of the goods until the customer pays.

This structure suits businesses whose sales are growing faster than their incoming cash flow. When a new order arrives that is bigger than anything the business has handled before, Purchase Order financing can be the difference between accepting it with confidence and turning it away.

Who the funding is designed for

The funding is aimed at businesses that sell finished goods, raw materials or components to other businesses or to government departments. Service businesses such as construction, cleaning and security fall outside its scope. Profit margins need to be above 20%, and the goods must be supplied on a supply and delivery basis, with delivery included by the supplier or outsourced to a reputable third party.

Because the funding depends on the customer paying for the order, the creditworthiness of the customer is a critical part of the assessment. RM Capital also reviews the supplier to make sure it has the reputation and capability to deliver the products ordered. This review protects everyone involved: the business, the customer and the funder all depend on the supplier delivering what was promised.

How a deal comes together

The process is set out in clear steps. The business sends RM Capital a copy of the purchase order or signed appointment letter, together with the supplier agreement, pro forma supplier invoice or quotation. RM Capital then asks for certain information on the business to review the transaction. Once all the necessary information and documents are in hand, the business is notified of the approval and of any other securities needed.

A factoring agreement and a guarantee agreement are then sent for signature, and the money is paid to the supplier. When the customer pays the invoice, the funding and funding costs are settled, and the balance goes to the business.

Throughout, clients deal with the decision makers directly. RM Capital aims to approve funding in time scales that make commercial sense, with utmost confidentiality and minimal paperwork.

Choosing a funding partner

Businesses comparing Purchase Order Funding Companies will find that the details matter. Who pays the supplier, how quickly, and what happens when the customer pays all shape how well the funding works in practice. RM Capital's clients typically cannot arrange bank financing in the short term but have the foundation in place for long-term success. The company brings commercial and legal acumen to designing short to medium-term funding solutions around each client's specific requirements.

Purchase order funding sits alongside RM Capital's other products, which include invoice discounting, accounts factoring for advocates and other professionals, cash flow funding, bridging and structured finance. A business that starts with funding for a single order can look at these options as its needs change.

For a growth business heading into the busy end of the year with a confirmed order and a supplier asking to be paid, the message from RM Capital is practical: the order itself may be the key to getting it funded.

Learn more at https://www.rmcapital.co.za/

About RM Capital

RM Capital is a niche funder specialising in purchase order funding, accounts receivable factoring, invoice discounting, bridging and structured finance, along with other customised funding solutions. Based at Melrose Arch in Johannesburg, the company designs short to medium-term funding for growth companies and entrepreneurs, structured around each client's specific requirements. Its clients typically cannot arrange bank financing in the short term but have the foundation in place for long-term success, and funding can be used for cash flow, working capital or as a financial bridge based on specific exit events.

Media Contact
RM Capital
Email: info@rmcapital.co.za
Phone: +27 11 447 7596
Website: https://www.rmcapital.co.za/