Cash Flow Solution: Tender Financing and Purchase Order Financing


The Tender Secret: How to get tender finance when banks refuse you?

Tender financing or tender finance in South Africa is a funding option for businesses or tenderpreneurs that need cash to fulfil purchase orders from government, many times entrepreneurs, especially black, find that they have the skills that can or wins them government tenders but do not have the money to spend on the order, a government purchase order as it is sometimes called, to do the work that a particular government tender requires them to do and accomplish the tender goals.

Purchase order financing or purchase order finance is a funding option for businesses that need cash to fill single or multiple customer orders. In many businesses cash flow problems exist. There will be times where there is simply not enough money available to cover the costs of doing business.

Click Here & Save Time!  Apply Once But To Many Tender Funders!

The Problem

Black entrepreneurs in particular often complain that banks refuse to take the risk to provide the tender financing or purchase order financing. This becomes a “catch 22” situation for these businesses as government won’t give a business a tender unless they have what is called Bank Financial Guarantees for Tenders or a “big brother” who will say “I guarantee to assist this business with tender financing so that it can get the tender or be able to meet the cashflow needs.”.

The Solution: Tender Financing

Tender financing need in the market exists, it is a general business cash flow need nothing special, and so the market innovated with alternative tender financing and purchase order financing options, financiers who are willing to take the risks that the banks won’t take, financing the said business or tenderpreneur, and at very competitive interest rates than even the banks sometimes.

Benefits for your business:

  • No bank deposit to get tender finance.
  • No bank collateral.
  • Competitive interest.

Click Here & Save Time!  Apply Once But To Many Tender Funders!

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Gauteng Open Tender System pilot shows positive results in empowering

Gauteng Open Tender System
Gauteng Open Tender System, road to transparency.

Engineering News reports that the Gauteng Open Tender System pilot is set to become policy of the Gauteng government, in their 9th December 2016 article. Engineering News further writes,

“In an effort to tighten up public procurement, improve transparency and eliminate potential corruption gaps, the Open Tender System breaks the mould of the traditional behind-closed-doors decision-making process of the selection of bidders for projects, goods and services in South Africa’s richest province.”

Gauteng Finance MEC Barbara Creecy told Engineering News that the Gauteng government plans to introduce the new legislation within the course of next year – 2017. Engineer News further reports that

“The move is in line with broader ambitions to safeguard the public purse, combat corruption and restore public confidence in Gauteng’s public procurement system, which has come under fire in recent years and has developed a reputation for favouring those with political influence.”

“Entrepreneurs, innovators and business executives have told me that they do not bother anymore to bid for government work, citing as the reason that, in order to get a tender, you have to bribe your way into the corridors of power,” Gauteng Premier David Makhura says.”

Source: Engineering News


Times Live reports that a special council meeting of the Gauteng council was scheduled for 12 December 2016, this special meeting allows for the urgent council business (tabling of quarterly reports) to be completed before the new year. In that meeting council was to vote, amongst other issues expressed as urgent, an amendment to the Supply Chain Management Policy, however, the ANC caucus was not present for that vote to happen. sincerely hopes, as Gauteng Finance MEC Barbara Creecy said, this year, 2017, the Gauteng Open Tender System will be a permanent fixture, the clear evidence shows that the Open Tender System actually improves empowerment of marginalised people than being counter empowerment as some claim, e.g. At least a third of suppliers were consistently rotated and there  was more women empowerment.

Source: Times Live

Bank Financial Guarantees for Tenders

R100 money notes

Government wants entrepreneurs to show that they have enough money to execute a tender for a certain period before payments come, usually the period is 3 months, this is becoming a trend, so a bank financial guarantee is a letter from your  bank that states that the bank guarantees that you have the financial means up to a certain amount, you can include this letter in your bid for a government tender.

READ MORE: How to find tender finance when even banks refuse you?

Typically, the financial guarantee is a guarantee that you will have enough cash flow to cover the minimum period before your first payment comes for rendering your service, this is usually 3 months.

You will earn points for securing a Financial Guarantee that shows that your business will have enough money or cash to pay for expenses incurred for the minimal time to execute the tender, as stipulated by government.

The Financial Guarantee goal is to make government or company see that your business will have necessary resources to provide the service to government or company and execute the tender successfully, many tenders fail because the entrepreneur run out of money to do the tender.

READ MORE: How to find tender finance when even banks refuse you?

An example of a typical Financial Guarantee requirement in a tender may look thus:

“The responding bidder must show capacity to deliver a sustainable service for a period of three (3) months without external support.

In order to do so a Bank guarantee letter must be provided and this will count for 10 points towards the Functionality score:

  • Supplying a R9 000 000.00 financial guarantee will earn the bidder 10 points;
  • Supplying a R6 000 000.00 financial guarantee will earn the bidder 6 points;
  • Supplying a R5 000 000.00 financial guarantee will earn the bidder 3 points;
  • A guarantee of less than R5 000 000.00 will earn the bidder zero points.

Any other proof of financial resources for funding which the bidder intends on utilising to fund this project can also be submitted. (The Department requires this information to ascertain whether the bidder can carry the initial cash commitments for a period up to three (3) months for the district, or each of the districts, awarded to the bidder without any additional external support).”

READ MORE: How to find tender finance when even banks refuse you?

Please ask your bank what Financial Guarantee they can provide you if you wish to apply for a tender and in fact actually was awarded it, this exercise of asking your bank will definitely help your business as the bank will probably give you more advice on what criteria you need to comply with.

I am Start-Up what can I do?Financial Guarantee

A Joint Venture is another business strategy by which you can add capacity to your business when you do have the skills necessary to execute the tender but lark, say, money or machinery.

READ MORE: How to find tender finance when even banks refuse you?

Find more information by reading our “how to tender in South Africa” general overview article.

How do I tender in South Africa?


Ok, before you rush to registering for, the only truly FREE tender alert service in South Africa, please read this first!

First of all, you need to establish whether your business is capable of meeting the requirements of the tender. Usually, an invitation to tender is very specific about the practical tasks to be accomplished. Be realistic about your ability to accomplish those tasks. Remember, failure to deliver what is required at the stated costs and within the time agreed will probably make you liable for penalties in terms of the contract.

As a guideline, an enterprise that is ready to tender:

  • Is a registered business
  • Has a good banking record, credit history and relationship with its suppliers and clients
  • Is able to deliver – on time, on budget and according to specifications
  • Is up to date with its taxes
  • Pays its bills on time
  • Has the required cash-flow and other resources to complete the contract
  • Is pro-active, actively looking for business opportunities
  • Is able to deliver goods or services of consistent quality
  • Has qualified employees
  • Has, or can acquire, the right equipment, clothing and accessories to complete the tender
  • Has registered its employees with the Department of Labour (UIF, Skills Development Levy, Workmen’s Compensation etc.); and
  • Has products that complies with SABS standards


Does my business have to be registered as a CC or company?

No. A sole trader or partnership may tender. However, the business has to be:

  • Registered or licensed with the relevant local authority
  • It must have a bank account; and
  • It must be registered with the South African Revenue Services and must have an up-to-date tax clearance certificate.

What about tendering together with another business?


This is called a joint venture (JV). When two businesses form a joint venture (a partnership between two business) they each contribute to the project and share the profit. In this way two (or more) small businesses may be able to win a large tender that neither would have been able to take on alone.

Use the following guidelines when selecting a JV:

  • Choose you partner very carefully. Like any partnership, a JV thrives on mutual trust and collapses when partners become suspicious of the others motives, agendas and ethics
  • Enter into negotiations early
  • Rather involve two or more smaller JV partners than one other firm that is much bigger than you are; and
  • Draw up a formal JV agreement and state all expectations clearly, including usually vague notions such as the one partner empowering the other with skills.


  • With great care and precision! Follow the instructions carefully. Even the smallest error may result in the cancellation of your tender application.Your nearest Tender Advice Centre (TAC) will help you get hold of and complete the tender documents.
  • Be quite sure that you have enough time to prepare and submit an offer before the due date.
  • It is up to you to deliver or post your tender documents to the correct address by the due date, and indeed at the correct time. If the closing time is 12 noon, your tender will be disqualified if it is handed in at one minute past 12.
  • The tender will include all the requirements and specifications for the goods and services to be supplied. Be quite sure that you will be able to comply.
  • Include in your tender details all the relevant experience you have in relation to the proposed contract.
  • Do not forget to:
    • Include your VAT registration number, if you have one.
    • Guarantee the quality of your products or services. Also provide details of any SABS or ISO marks or sign of quality assurance that you are entitled to use.
    • Offer substitute products or services where necessary
    • Offer to make refunds if you fail to deliver as agreed.
    • Declare the percentage or quantity of imported products
    • State patents and details of any royalties
    • Describe the packaging
    • Give the time and place of delivery
    • Provide samples of products or goods if required
    • Use delivery documentation including delivery notes
    • Complete the tender documents in ink and sign alterations in full.
    • Obtain import permits for goods that were not made in SA; and
    • Supply the prices that you paid for the goods.


You will need to complete the following standard forms for National and Provincial government tenders:

FORM ST 36 Conditions for tendering with the state Also includes details of the addresses for delivery of your tender application.
FORM ST 8 Official cover page of the tender document To be signed in ink. Includes details of the buying department, validity period and closing date
FORM ST 5 Tax Clearance Certificate Obtained from SARS, should be valid at time of submitting the tender and should have a validity period longer than the validity period of the tender document.
FORM ST 6 Essential conditions relating to the tender Supplementary conditions to those laid out in ST36. Important to study carefully, as deviation from these conditions may invalidate your tender.
FORM ST 7 Closing dates, tender number, durability, price, delivery period etc. Also deals with the description fo the product of service concerned. Different ST7 forms may be use for different types of goods or services.
FORM ST 10 Asks questions that will help in the adjudication of the tender State any deviation in specification from those in the original tender; whether or not your quoted price is firm; whether you are an agent for the product or service; the amount of stock you carry; the type and location of the service facilities you offer; your VAT number (if any).
FORM ST 11 Promotes development of local businesses Preference Point Certificate to be signed. Applies only for services less than R2 million.
FORM ST 12 Prevents tendering on the basis of association Declaration of interest. EnPromotes development of local businesses suring fair and equal treatment, you must declare any relations with members of the tender board or government department.
Note: These forms are part of the tender invitation and are also available at any procurement office.

Keep in mind that you need to make a profit but that competing tenderers may offer a lower price.

In order to be competitive, experienced tender advisors normally suggest a cost plus 7.5% tender price. This may vary according the level of expertise and general availability (market) of the service or goods required.



This often requires an educated guess based on the following researched tender specifications:

  • Quantities of material needed
  • Length of time to completion
  • Minimum lead-time required (that is, the time before actually starting on the contract, often the time in which preparations are made)
  • Insurances needed
  • Depreciation of vehicles and equipment over the course of the contract
  • Indirect costs
  • Capacity to complete the contract

Some costs are variable – they may fluctuate as production fluctuates:

  • Labour
  • Materials
  • Equipment


Other costs are termed fixed costs or overheads:

These costs do not fluctuate with increases or decreases in production. Examples of costs that are usually fixed are:

  • Electricity
  • Owners salary
  • Subscriptions
  • Vehicle leases
  • Stationery


The following are also important considerations:

  • Will the purchaser be making interim payments (so that your business maintains cash-flow and can pay the weekly salaries, materials and so on)? This is especially important for lengthy contracts.
  • Will you require bridging finance? If so, do you have security for a loan?
  • If you will need to borrow money to perform the contract, you should do the groundwork while you are preparing the tender. Then if you win the contract, you will be able to get a loan so much more quickly.


The law requires the application of a preference point system for tenderers who are Previously Disadvantaged Individuals (PDIs) or women.


  • Generally, for government tenders under R500 000, 80% of the tender will be adjudicated on price and 20% on the PDI or gender status of the business owner(s).
  • For tenders over R500 000, the 90/20 price system applies.

You have to complete the relevant section (ST 11) if you want to be eligible for consideration under this system.


  • If you submit your tender to the right address by the due date and time, the Tender Board will let you know in writing whether you have been successful or not.
  • If your tender was accepted, you have to start planning to deliver the goods or services you offered.

If at first you don’t succeed, try and try again.

  • Every time you complete a tender document you will learn more about the process and requirements of tendering.
  • Once you have a won a tender, and built up a track record, things get a bit easier.

Where do I find latest tender information? is the only truly FREE tender alert service in South Africa, there are other tender services of course if you search Google.


  • Phone seda at 0860 103 703.
  • Contact you nearest Tender Advice Centre. Get the contact details from seda.