South African manufacturers often come across a cash paradox: their order book is full, but cash is still low.
The reason? They must buy the materials, pay the wages, and run the machines that fulfil these orders, all well before the customer clears the invoice.
Here’s how the timing normally works:
- The manufacturer pays for the raw materials before starting production.
- They must pay staff, often weekly, to carry out the process, as well as overheads and machine maintenance to see the job through.
- The money can take up to 90 days to arrive, despite the finished work being invoiced on delivery.
That is a normal part of manufacturing rather than evidence that the business is badly managed. It also means that standard funding for manufacturing businesses does not always fit.
This guide looks at the options established South African manufacturers can use to cover the period between paying for production and getting paid by the customer.
The gap gets bigger when business is good
Winning a larger contract should be good news. The problem is that the factory has to spend more money before it sees any of it back.
A bigger order may mean more revenue, but it also needs more materials and extra shifts, including overtime. The manufacturer must pay these well ahead of receiving the client’s payment.
The alternative is simply not an option. You can’t complete an order without the material, and no company wants to tell their staff members that they can’t pay them on time.
Why alternative funding is becoming popular
A search for manufacturing finance will often point you towards government-backed development finance. These schemes have their place, particularly for major capital projects. Yet they are less useful when a manufacturer needs to buy steel or thread now, to meet a delivery deadline next month.
Further, they often involve lengthy application processes that demand reams of time and paperwork. The approval process is slow, and funding is of little use if it arrives after the production window has passed.
Established manufacturers may instead find alternative forms of funding to be more practical, and some of these are becoming increasingly popular.
- Working capital facilities
The funder provides an agreed pool of money available, and the manufacturer draws from it when needed. They pay for the amount they actually use, making this useful when production levels vary from month to month.
- Inventory finance
This is funding tied to stock, so manufacturers can use it to buy larger quantities of materials and then repay the facility as they sell the finished products.
Companies that experience seasonal runs or get supplier discounts on bulk orders find inventory financing for small businesses to be particularly useful.
- Purchase order funding
This funding covers the cost of an order when the cost of fulfilling it is larger than a manufacturer’s available funds. PO funding is designed around an individual contract, unlike other facilities which are ongoing and not tied to a specific job.
Choosing the right fit
Manufacturing is unpredictable by nature. Orders can often appear without warning, while a quiet month can just as easily follow a busy one. Flexible funding thus makes sense because it can adapt to each situation.
Lula’s Cash Flow Facility is built with this exact situation in mind. With access to up to R5 million and no monthly account or admin fees, manufacturers have a ready supply of funds available to take on a sudden large order. They simply pay a fee on the amount they withdraw, with no interest or early-settlement penalty. Then, once the customer pays, they can settle the facility use again in the future.
Speed can matter too. Lula says its average disbursement time is 22 hours. Since 2014, it has funded more than 25,000 South African businesses with R13 billion, including R2.8 billion in 2025.
Qualifying for a working capital facility
The requirements are more accessible than those attached to a traditional bank facility, although manufacturers still need to pass the usual checks.
At a minimum, they must prove a certain level of monthly revenue, depending on the provider’s requirements. They will typically have needed to trade for a year, be SA-registered, and can back up their recent history with bank statements and a solid credit score.
Most manufacturers know that waiting for customer payments is an unavoidable part of life, but it doesn’t mean their cash flow should suffer while they do so. Having funding ready before that gap becomes a problem can make a large order much easier to take on, without putting the rest of the operation under unnecessary cash-flow pressure.
