Cash flow issues drive Aussie SMEs to disruptive solutions

Cash flow issues drive Aussie SMEs to disruptive solutions article image

Long payment terms and inflexible bank loans are having a serious impact on the ability of Australian SMEs to grow, a new survey has found.  

The survey conducted across Australia by finance specialists The Invoice Market, found that more SMEs are beginning to look for solutions to their cash flow problems from “disruptive” finance providers. 

And the number of disruptive finance providers entering the market has doubled in the past two years. 

Two out of three businesses surveyed said that a lack of access to finance was affecting their ability to grow. 

And the most common reason for seeking finance was to maintain the short term cash flow of the business. 

Long payment terms and difficulty accessing bank loans is driving their search for better forms of finance.  

The Invoice Market study found that 40% of SMEs access funds through traditional forms of debtor finance. Another 32% said they would be forced to use their personal savings or equity in the family home. 

Angus Sedgwick, managing director of The Invoice Market, says business finance can be expensive, inflexible and unsuitable. 

Working capital and cash flow finance 

Earlier this year his company set up Australia’s first online auction platform to create an efficient marketplace for invoice factoring. 

The platform matches businesses requiring cash flow funding with institutional and high net worth “sophisticated” investors willing to provide working capital and cash flow finance. 

To date, The Invoice Market has funded invoices worth more than $12.5 million in total. 

“The move to disruptive financing models is a clear vote against the onerous and inflexible terms banks and other types of financing levy on SMEs,” says Mr Sedgwick. 

“Just over 40 percent of the businesses in our survey said they’d turn to traditional debtor finance, with its flexibility compared to bank finance being the key benefit,” he says. “But there are another 60 percent who wouldn’t have access even to this type of factoring, due to requirements that their invoices be spread across a certain minimum number of clients or based on geographical limitations. These are good businesses, but their risk profile is just too high for the institutions.” 

Mr Sedgwick says finding an invoice facility is similar to getting a bank overdraft. angus pic resized

“If the bank doesn’t think you are a good risk, they won’t touch you, he says. 

“We will fund SMEs that aren’t ‘fundable’ elsewhere.” 

In factoring and discounting, a business borrows against its unpaid invoices, so instead of waiting until the bills are paid, they get instant access to cash.

“We will take on start-ups if they have a contract to supply goods or services to a solid company – provided we are comfortable with the arrangements in place.” 

Letter of credit 

Mr Sedgwick says exporters especially need cash flow funding for business growth. 

The Invoice Market recently entered into a unique funding arrangement with an Australian exporter of Wagyu beef to the US and South Korea. 

“We are funding them under a letter of credit arrangement with a leading US bank, Mr Sedgwick explains. 

“This means we are able to draw against the letter of credit with the issuing bank. 

“The company is no longer a debtor risk, it is a documentation risk.” 

The report’s key findings include:

  • Two out of three businesses said lack of financing was affecting their ability to grow
  • 52% are concerned that reforms to the banking sector are going to make it harder to get a loan
  • 70% said long invoice payment terms were negatively affecting their cash flow
  • The number of tech-enabled disruptive financing instruments in Australia has doubled over the past two years
  • 11% of SMEs are turning to disruptive financing instruments 

To learn more about The Invoice Market visit:


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