Aussie businesses are lagging behind their British counterparts in taking up invoice financing to boost cash flows, but increasing competition is set to increase the amount of funds available to growing firms.
Data from the Reserve Bank and the Debtor and Invoice Finance Association suggest invoice finance volumes account for 3.9 per cent of GDP in Australia. Yet this is tiny compared with 19 per cent in the UK, according to Australian Invoice Finance.
Speaking exclusively to My Business, finance veteran and Australian Invoice Finance co-founder Greg Charlwood said the reason appears to be a lack of interest in Australia’s established banking sector to support SMEs.
“I think the major part is because the banks in the UK are much more involved in invoice financing than they are in Australia,” said Mr Charlwood.
“Banks there seem more mature in that regard and they are willing to fund SMEs, whereas I don’t think the banks in Australia are as keen on funding SMEs.
“During the financial crisis, the bank in the UK kept lending – if anything, they increased the level of lending [to SMEs] – whereas here in Australia, the banks tended to close shop and made it much harder to borrow money, and in fact called a lot of loans in.”
In launching Australian Invoice Finance, Mr Charlwood said that he and business partner Greg Woszczalski – who between them founded the likes of Bibby Financial Services Australia, 180 Group and ORIX Cash Flow Finance – aim to offer SMEs more choice when it comes to meeting their capital requirements, and provide a higher level of funds upfront than established competitors, to the tune of 85 per cent of the invoice’s value.
“A lot of businesses find that financiers do not support them when they get into difficulty. We do support them in the tough times and will look to take on clients that are restructuring or turning their businesses around,” Mr Charlwood said.
A July report by payments provider IntegraPay found that business owners spend an average of eight hours per week – or 52 business days every year – chasing and collecting late payments, highlighting the severity of cash flow constraints on business growth.
According to Mr Charlwood, more lenders in the SME space means more choice for business owners, as well as a larger pool of funds with which to meet cash flow requirements.
“Over the last few years, there’s been a lot of consolidation [in the invoice finance market], and two of the major players – being Scottish Pacific and CML – each acquired three other invoice finance companies. So that set up a situation where the market is really crying out for other offers,” he said.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.