In South Africa, small to medium-sized enterprises (SMEs) are the backbone of the economy, driving entrepreneurship and employment. Although these businesses play a critical role in the growth of the local economy, they are still struggling to access financing that can help them scale and grow sustainably.
Access to finance and limited cash flow have been cited as one of the primary reasons behind the high failure rate of micro, small and medium enterprises (MSMEs) in South Africa. According to a study conducted by the University of the Western Cape, South Africa has a higher start-up failure rate – 70 to 80% of small businesses fail in the first five years – than anywhere else in the world.
This highlights a growing need for more alternative and impactful financing for small businesses. To help with the issue, Aions Ventures’ USKO trade finance solution and Proudly South African have partnered to unlock purchase order (PO) funding and invoice finance for SMEs, helping them overcome one of the biggest challenges in local supply chains: cash flow constraints that prevent capable entrepreneurs from accepting and fulfilling large orders.
The solution is designed to close the funding gap and provide PO-specific funding that allows SMEs to buy inputs, deliver on time, and keep momentum.
Kerryn Campion, Chief Operating Officer at Aions Ventures, says the model offers a practical alternative to traditional finance that has long overlooked emerging suppliers.
“Too many capable businesses reach supply chains only to stall at fulfilment. Cash flow becomes the barrier, not the capability. With Proudly SA, PO funding becomes part of the operating fabric within an ecosystem that already connects buyers and suppliers. USKO sits in the background, protects every layer in the transaction, and moves quickly so entrepreneurs can deliver, get paid, and grow on their terms.”
“Our job is to be useful for a limited period, help businesses build a track record, and then see them graduate into traditional finance when the time is right.”
What is Purchase Order Financing?
Purchase order funding (PO funding) is a unique funding solution for South African businesses that helps them fulfil large orders even when facing temporary cash flow limitations. It bridges the gap between receiving a confirmed purchase order (PO) and securing payment from the customer.
PO funding offers SMEs accessibility because:
- Funding based on the buyer’s creditworthiness: Mitigates risk for your business as the lender relies on the creditworthiness of your customer, not yours.
- Fast access to capital: Receive funding quickly to secure materials and fulfil the order without delays.
- Increased buying power: Take on larger orders without worrying about upfront costs, boosting your business potential.
How USKO’s PO Financing Works
The partnership between Proudly South African and USKO seeks to address one of the key pain points that hinders the growth of small and medium-sized businesses. USKO’s solution is designed to close that gap. It provides PO-specific funding that allows SMEs to buy inputs, deliver on time, and keep momentum.
It also offers invoice discounting to bridge 30-, 60-, or 90-day payment terms, giving businesses the liquidity to meet day-to-day needs while awaiting payment. For SMEs with ongoing orders, USKO provides a revolving credit facility that gives approved MSMEs a reusable line of funding, allowing them to draw up to 50% of order costs based on past sales.
Additionally, USKO supports marketplace sellers by advancing up to 100% of their next payout through its early payout option, enabling them to restock immediately rather than wait for disbursements.
USKO’s Profit-Share Model
Unlike traditional finance models that place interest on the entire capital amount required by the applicant, USKO uses a profit-share model. Here’s how it works:
- No Interest on Principal Amount: Usko does not charge interest on the principal amount. SME’s do not carry the debt obligation on the amount borrowed; rather, USKO’s fees are only on the profit margin.
- SME Profit Retention: USKO’s PO financing model enables SMEs to keep the majority of their profit and use none of their own capital as repayment.
- No Instalments, compounding or penalties: USKO does not require any repayments from the SME until the end customer pays the PO. This is to ensure cash flow is protected throughout the transaction.
- Cost Scaling: Unlike traditional finance, which gets more expensive the longer the repayment is, USKO has a fixed cost with no time-based interest.
- Transparency: USKO ensures that applicants are aware of the costs during the application process, driving transparency within the financing process.
“Usko is intentionally built for SMEs who struggle to access bank finance, so our requirements are practical, proportional, and opportunity-led — not collateral-heavy or credit-score-driven. We focus on the strength of the transaction, not the size of the entrepreneur’s balance sheet,” says the company.
How USKO Assess SMEs for Financing
1. Transaction-first Assessment
Core evaluation is based on:
- The authenticity and reliability of the purchase order or invoice
- The credibility of the buyer
- Margin size and operational feasibility to deliver
- Supplier readiness and logistics
This removes the need for:
- Traditional collateral
- Personal sureties
- Multi-year audited financials
- High credit-score hurdles
2. Basic Compliance (KYC, Company Verification)
Standard checks are done to verify:
- Business registration
- Director identity
- Bank account validity
- Tax status
- These keep the transaction transparent and secure for all parties.
3. Insurability and Liquidity Checks (important, but not Exclusionary)
Because USKO insures the capital deployed into a deal, the company must check that:
- The transaction is insurable, and
- The entrepreneur has enough liquidity to operate responsibly.
- This is not a bank-like credit requirement.
It’s to satisfy insurers and to ensure the MSME is not put under undue operational strain.
“If an MSME does not meet a particular insurance requirement, we work with them — it doesn’t automatically disqualify them,” explains USKO.
4. Deal-by-deal Structuring
Because MSMEs operate differently and risk profiles vary, we do not use a one-size-fits-all model.
Some deals may require:
- Milestone-based disbursements
- Additional supplier confirmations
- Adjusted payment flows
- Reduced exposure on certain line items
Each deal is evaluated in isolation to find the safest structure for both Usko and the entrepreneur.
B. What We Don’t Require
To remain accessible, Usko does not ask for:
- Collateral or property
- Personal surety on the full capital amount
- Long credit history
- Cash contribution to secure funding
How to Qualify for USKO PO Financing
Usko is still in its early deployment phase, and the results so far show strong demand and robust learnings that are shaping our next phase of scale.
Deployment to Date
- R15 million deployed across multiple MSMEs
- Deals span a range of order sizes and industries
To qualify for the USKO PO financing, SMEs must meet the following criteria:
- 30% gross margin on purchase orders
- Well-established buyer relationships
- Proven operational delivery capacity
Priority groups include:
- Women-owned MSMEs
- Youth-owned MSMEs
- Township and peri-urban businesses
- Rural-based entrepreneurs
- Historically excluded operators with limited access to formal finance
For SMEs who are still in infancy and might not qualify for the PO financing, USKO does not disqualify them forever but works with them to ensure they meet requirements in future. SMEs interested in the USKO PO financing vehicle must register on the Proudly SA website.
In South Africa, small to medium-sized enterprises (SMEs) are the backbone of the economy, driving entrepreneurship and employment. Although these businesses play a critical role in the growth of the Read More
