A national invoice factoring company and an SME turnaround specialist say there is a growing need for debtor finance, with more small businesses turning to it as an effective source of funding.
FactorOne general manager Greg Charlwood said debtor finance is becoming the most popular choice of funding for turnaround firms because it is flexible and can impact quickly on the financial health of a business.
“Small-business owners also like it because invoice finance grows with their business, and they do not have to dilute equity to improve working capital or achieve successful debt restructuring,” he said.
Mr Charlwood said it is important for businesses to address problems associated with fast growth and poor cash flow earlier rather than later.
“When businesses end up [with financial] difficulties, they often leave it too late. They always think that there is light at the end of the tunnel – that big new order that will save their business,” he said.
“Unfortunately, many end up in a formal process such as voluntary administration or liquidation, which is much more traumatic than an informal process of turnaround.”
Vantage Performance managing director Michael Fingland said the company has used invoice finance as an effective turnaround strategy for businesses in various industries including transport, mining engineering, manufacturing and telecommunications.
“To fix cash flow problems, an SME can raise more debt or equity, sell assets or improve their turnover of debtors and stock. Some of these options may not be achievable in the timeframe required, so increasingly debtor finance has become the tool of choice for SMEs and turnaround firms,” he said.
“Of the many options to free up cash flow, using invoice finance means you don’t need to make changes to ownership or assets. It’s a lot more flexible.”
If you’re a broker looking to move into a new growth area like debtor finance, be sure to register for the upcoming New Revenue Streams Boot Camp event – it is the perfect opportunity to learn how to diversify. The intensive workshops will be held in Sydney and Melbourne on 27 and 29 October respectively.
This new initiative by Mortgage Business’ sister publication, The Adviser, is presented in partnership with NAB Broker, Suncorp Bank and FAST, and is aimed at brokers looking to add additional revenue streams to their business in today’s changing market.
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