For small South African businesses, tenders and purchase order financing is a fantastic way for businesses to grow, achieve profit, and build a client base. Not only do they provide more consistent work for companies, but they also can help spearhead growth.
We’re going to break down everything you need to know about purchase orders and tenders in SA, and how to find opportunities for your business.
Purchase Orders vs Tenders
A purchase order is relatively self-explanatory: it’s a confirmed order for purchase of stock or services from another company – i.e. this is a guarantee from a reputable business in order for your company to provide stock.
What tends to happen though, is that businesses may not be able to fulfill that order right away. This is where purchase order funding for small businesses is an option, whereby you can use your purchase order documents from the reputable customer or client in order to draw funding from a bank or company. This financier will often directly pay for the stock you require from your supplier, in exchange for a portion of the profits. Of course, there are many terms and conditions as to when you’re eligible for such small business financing like Purchase Order Funding.
Check out our full guide on Purchase Order Funding to find out more.
A tender involves a company bidding for an opportunity to offer services or products at a fixed price.
What makes a tender different from other normal work acquisition is the bidding process. When larger companies or state entities (governmental) require work to be done or products to be purchased, a tender process takes place.
This allows smaller businesses to apply to handle the work or order in hopes of them becoming the contractor, allowing them to put forth their costs, business plan, and strategy involved. The larger company or organization who put the tender out can then assess and review the various bids from smaller companies, and award a company the tender.
Once the client entity accepts a tender, it is binding on both parties. This means that the person or company that won this business opportunity has to provide the goods or services in the manner agreed to and at the price offered, and the client entity must pay the agreed price at the agreed time. In other words, once accepted, a tender is a binding business contract.
The tender process is also a way of ensuring that goods and services are procured fairly, and in a manner that is most cost-effective for the organization.
Why Would You Pursue a Tender or Purchase Order?
If your business is in an industry which offers an in-demand product or service for big corporates, NGOs, or other larger companies, tender work could be for you. It is a great, low-risk way to bolster your income and generate extra revenue for your business.
Also, if you’re looking for more stability and consistency with your operations, as opposed to constantly seeking new clients or customers, acquiring a tender or purchase order arrangement with another business could provide just that.
It is a good idea to consider pursuing tender work wisely, as the submission and planning process just to apply can be costly and time consuming. However, there are a number of key advantages to getting tender work for your small business:
Almost always guaranteed payment
If you’re awarded a tender by a state entity, for example, you will be guaranteed pay, which can provide security and sustainability to your business; whereas private deals are vulnerable to more complications, like bankruptcy of the company you’re providing for, difficult customers, or other unforeseen circumstances.
Acquiring a tender can help your company grow substantially from a financial perspective, but doing such large-scale jobs can also greatly develop the experience and expertise in your enterprise.
Because there is almost always a guaranteed payer, it is a way to fund your experience, without dishing out any cash yourself.
Contacts and networks
The tendering process and a successful contract will expose your business and its workings to the state-owned entities and individuals, which could help you renew the contract or help your inclusion for others.
As mentioned above, one of the key advantages of tenders are the sustainability they provide to a business. With the arrangement and contract details in place, you can help create a plan of longevity and also secure a fixed income for months or years (depending on the contract) which is a luxury many other small businesses often don’t get.
Finding Tender Opportunities
While your business may be ready to seek tender opportunities, where exactly to look is a common question. There are numerous resources and platforms in which South African businesses can find other companies who have put a tender out. There include:
Most (if not all) government tenders are posted online.
The national Tender Bulletin is published on the South African government’s official website every Friday. The time depends on when it is received from the Government Printing Works.
The Tender Bulletin, as well as most provincial tender bulletins, are also published on the Government Printing Works' website. Information on a specific government tender is available from the relevant department as indicated in the Tender Bulletin.
Another good place to find tenders online is to look is the Government eTender portal.
The bigger state-owned companies and large corporates often publicize their own tender bulletins, which are usually found on their websites.
Seek out companies in the industry you provide for and that you’d be interested in working with, and monitor their websites to find a tender that aligns with your business’ goals and capacity.
Time is changing this, as many tenders are now posted online, but many are still advertised in newspapers, whether local or countrywide papers. The smaller, local newspapers will often include tenders which will serve your area and may be viable options to pursue, however, they are less frequently found in papers these days.
Tender news sites
There are a handful of websites which aggregate tender opportunities. Much like general job portals, these websites, such as SA Tenders, re-post or share tender submissions from various companies, public enterprises, and state-owned entities.
These are often quick and efficient ways of finding many opportunities, with some even allowing for search functions and filters into a specific industry, which will make your search easier.
Other options include:
So, you’ve found the tender you’re after, what’s required?
When applying for tenders in South Africa, there are a number of things each bidder requires. Small companies need to provide various forms in order for their submissions to be considered, and while what needs to be included may differ from company to company, they usually require the following:
- Bid Documents
- Central Supplier Database registration
- Resource requirements
- Tax Clearance certificate
The breakdown of what you will be offering to the client and at what rate, along with the details of the agreement and the terms and conditions involved.
This will include a declaration of interest. This is a declaration to say that you have no personal relationship with anyone in government or a state-owned enterprise. The reason for this is to avoid a conflict of interest or nepotism when they award contracts.
Central Supplier Database Registration
This is applicable if the tender you are applying for is for the government.
The CSD is a list of all the individuals, companies and organizations who are registered and approved to provide goods and services to the government.
It’s purpose is to provide government departments with a central database of pre-approved suppliers from which they can select.
Tax Clearance Requirement
In order for your company to be considered, you’ll need a tax clearance certificate. These need to be acquired from SARS, and will only be issued if all your tax payments and bookkeeping is up to date.
This provides security for the client and your own business.
Before submitting any documents, you need to consider whether your business is capable of completing the required work. Take into account the following:
- Technical expertise;
- Cash on hand;
- Current business capacity;
- Ability to get finance (FundingHub can help with this, see below);
Tender Finance Documentation Requirements
In order to get finance for your tender, these are the minimum documents you are going to require:
- Valid tender document;
- CSD Registration document;
- Business registration document;
- Supplier quotation (including if you are going to be a supplier)
- Tax clearance certificate
- Director’s ID document
Finding and seeking tender opportunities can be a daunting and ambitious task, but it can also provide to be a game-changer for your business if the right contract and terms are awarded, helping grow your business and provide fantastic stability for you and your company.
The FundingHub Tender Finance Process
FundingHub helps you find the perfect partner to finance your tender. Our process is different than going direct to a lender because we do the heavy lifting for you. When you apply through FundingHub we compare options from all the finance houses in South Africa who offer tender and purchase order finance.
We then get feedback from them on their pricing and whether they’re able to help you or not and get back to you. You can then make a decision on who you want to work with.
Best of all, FundingHub is free and easy to use. Just fill out a quick application form, provide your details, upload your documents - and we take care of the rest.
Here’s a summary:
- Fill out an online application form (or you can call us, too).
- Upload your documents (or collect them, and upload at a later stage).
- We shop around for you, and compare quotes from over 40 different lenders in South Africa.
- We give you some options on who the best finance partners will be.
- You choose your best option, and we send off all the details you have provided to them.
- You get finance directly from the partner. We don’t charge you anything!