In the high-stakes world of government and private sector procurement, submitting a tender is more than just filling out forms and offering competitive pricing. It’s about strategy, timing, and — more often than not — financial preparedness. At Discount Capital, we’ve worked with countless SMEs trying to navigate this complex ecosystem, and one truth keeps resurfacing: financial planning is not optional; it’s survival.
From bid bonds to working capital to delivery timelines, the difference between a winning bid and a lost opportunity often lies in the numbers behind the proposal. And sadly, many SMEs only realize this after they’ve missed out.
The Hidden Financial Demands of Tendering
On the surface, submitting a tender might seem like an administrative process. But scratch beneath, and you’ll see a web of financial requirements that can derail even the most qualified bidders:
- Bid Bonds: Usually required as a form of security to prove commitment to the process. These can be up to 2% of the contract value — not a small amount for a growing business.
- Performance Bonds: Once a tender is awarded, the winning bidder may be required to provide a performance bond of 5–10% to guarantee the work will be completed as agreed.
- Working Capital: If the contract requires you to deliver goods or services upfront, you’ll need cash to fund production, pay staff, or manage logistics before payment comes through.
- Delays in Payment: Even after successful delivery, payment might take 30, 60, or even 90 days, tying up your cash flow and risking your operational health.
Without a clear plan on how to manage these demands, many SMEs get overwhelmed and walk away — or worse, underdeliver and risk being blacklisted from future tenders.
Financial Planning: What We See SMEs Get Wrong (and How to Avoid It)
We’ve had front-row seats to some incredible wins — and avoidable losses. Here are some of the most common mistakes we see SMEs make when approaching tenders:
Underestimating the True Cost of Tendering
Many businesses focus on their proposal figures but forget to factor in the ancillary costs — documentation fees, courier services, due diligence reports, and bid bonds. These hidden costs can add up quickly and cause cash crunches when least expected.
Not Securing Bid or Performance Bonds Early
Waiting until the last minute to secure a bond is a risky move. At Discount Capital, we’ve seen businesses lose out simply because their bid bond wasn’t processed in time. A little foresight can go a long way.
Assuming the Contract Itself Is Enough
Just because you won a KES 10 million tender doesn’t mean banks will throw the red carpet your way. Lenders look at your business track record, cash flow history, and ability to execute — not just the contract in hand.
Over-reliance on Internal Funds
Trying to finance large-scale tenders purely from your own reserves can drain your business. This is especially true if your payment comes months after project completion.
How to Prepare Your Finances for Tender Success
We’ve worked with SMEs across various sectors — construction, supply, services — and we’ve found that a bit of financial preparation makes a huge difference.
Here are some of our most effective tips:
- Engage a financing partner early: Don’t wait until the tender is about to close. Involving your financier early gives you time to secure bid or performance bonds, assess cash flow needs, and plan for contingencies.
- Get pre-qualified for working capital or invoice discounting: This way, you already know how much support is available to you in case your bid is successful.
- Understand your delivery obligations and costs in detail: Before you price your bid, break down your cost structure. If you’ll need to import materials or hire subcontractors, account for currency fluctuations, taxes, and delays.
- Use invoice or cheque discounting to keep your cash moving: If you’re expecting payment in 60 days, but you need to restock now, invoice discounting allows you to unlock that cash upfront and keep the business engine running.
How Discount Capital Supports SMEs Through the Tender Process
Over the years, we’ve tailored our solutions specifically for SMEs that bid for tenders and LPOs. We’ve become more than just a financier — we’re a partner in the process.
Here’s how we help:
- Bid & Performance Bonds: Fast turnaround times, competitive rates, and minimal paperwork.
- LPO Financing: Fund up to 80% of your contract to help you deliver without draining your reserves.
- Invoice Discounting: Convert your unpaid invoices or post-dated cheques into cash within 24 hours.
- Expert Advisory: We guide you through the tender process to avoid common pitfalls and strengthen your financial strategy.
And unlike traditional lenders, we understand the local landscape — we know what SMEs face, and we meet them there.
Don’t Let Finances Be Your Tendering Blind Spot
Tenders are an amazing growth opportunity — but they require more than ambition and expertise. Financial planning is what turns a promising bid into a successful contract.
At Discount Capital, we don’t just offer funding; we offer partnership. So before your next bid submission, let’s talk. We’ll help you prepare, plan, and win.
Let’s Get You Ready for That Tender
- Call us on: 0713 383 855
- Email: info@discountcapital.co.ke
