We're happy about competitors in the media
Debtor finance is a facility that can significantly improve a business’ cash flow position, yet in Australia, awareness and use of this solution is still below that of our UK counterparts.
Each new financial year brings about change to the business landscape. This year, July 1 saw an increase in the minimum wage, increased income threshold for employees who are covered by unfair dismissal laws, changed fuel tax credit rates and a number of revised business tax measures.
Through it all, however, one thing remains unchanged: cash flow is key.
Whilst a healthy level of incoming revenue is critical to business success, many SMEs do not actually have a plan or solution for securing it.
Debtor finance is a facility that can significantly improve a business’ cash flow position, yet in Australia, awareness and use of the solution is below that of our UK counterparts. But it is growing. According to the Debtor and Invoice Finance Association of Australia (DIFA), the December 2015 quarter saw a total annual debtor financing turnover of $64.4 billion. This marked an increase of 2.8 per cent over the previous year.
We do not need to mention names, when we say that a certain Debtor Finance funder has been investing heavily in promoting their brand and services in the lead up to their recent ASX listing. Another ASX listed funder has refreshed their brand and launched a debtor finance product. There is also a plethora of start-up and evolving invoice funders striving for air-time in the media.
We love it!
A healthy level of competition in the industry is raising the profile of Debtor Finance as a cash flow solution, ensuring that SMEs have all available options at their disposal.
Delving into debtor finance
Debtor Finance allows businesses that sell on credit terms to other businesses to raise working capital from their unpaid invoices. Once established, the facility provides working capital much like a bank overdraft.
There are significant differences between the debtor finance solutions available, for example
- whether a facility is disclosed or undisclosed to customers
- the terms e.g. advance rate, discount rate, service fee, concentration limit
- administration obligations e.g. reconciliations, verifications, POD requirements
- accessibility of funds e.g. release of retentions, recourse periods, allowable uploads & drawdowns
Many businesses are in a position where they may benefit from a debtor finance facility but may not know about the finance solution or require help in understanding how it works.
Trusted advisors playing a part
An exciting business development opportunity exists for finance brokers, accountants and financial planners to inform their business customers about Debtor Finance as a funding solution. At Classic Funding Group, we partner with trusted advisors to identify clients that may be well-suited for a debtor finance facility and, if they need it, mentor them through the subsequent transactions.
For those brokers and advisors that are well versed in the world of debtor finance, now is an opportune time to touch base with clients that already use debtor finance. Considering the ample changes over the last year, it is important to ask clients whether their current arrangements are still suitable for their needs.
Have their business goals shifted in the new year? Are there any pain points with the existing facility that can be overcome by switching to another funder?
Don't let your clients become disenfranchised with their current solution - check in and make sure you are tailoring their facility to their changing needs.
Find out how our Confidential Debtor Finance solution differs from the competitors.