Why is there a rise in receivables finance in Australia?
In recent years, there has been a notable increase in the use of receivables finance for Aussie businesses to boost cash flow. According to financing experts, the cash-flow volatility often faced by small businesses has compelled them to seek funding alternatives. In that quest, many came to the gradual realization of using the accounts receivables to gain financing. Thus receivables finance has become a great medium to access cash flow. However, market reports suggest there’s more to it. On that note, let’s understand the reason behind the popularity of receivable financing in Australia. Understanding Receivables Finance Receivables financing allows business owners to get funds against a portion of their pending invoices or accounts receivables. They can access up to 90% of their receivables, and since the loan is pegged upon the receivable’s ledger, there is no need for security. The financing company or lender providing the funds charges the interest only on the used amount, not the entire credit limit. Receivables finance helps business owners to pay off their suppliers on time, continue with the production schedule and make other business investment decisions without being disrupted by low cash flow. Why do Aussie Businesses Prefer Receivables Finance?
After due diligence, we have come up with the following reasons behind the reliance on receivables finance: Awareness About Different Business Loan Products Over the years, the global and local economic scenario has gone through a drastic change. Things are not the same as before, especially after the pandemic. Moreover, the emergence of private lending options has made business owners more aware of the alternatives they have to fund their capital. It has led them to explore options like receivables finance that are easily accessible and offer an instant boost the capital and cash flow. So, the increase in awareness among the business owners is one of the influencers. Businesses’ Needs to Suffice Extended Payment Terms These days, big enterprises often request more time to pay their debts. What used to be for 30 days before has extended to 60 days and sometimes even 90 days. So, if you are an SME dependent on the payment of a big corporate client that chooses a longer payment term then that can create a significant cash-flow gap. Small businesses hardly have any say in these matters since they are dependent on their clients’ payments. According to a market report, more than 83% of SMEs suffer from this issue. Hence, they are now resorting to alternatives like receivables finance to bridge the cash-flow gap. (Source: https://www.xero.com/blog/2019/05/what-australian-small-business-wantsfrom-government/) Lending Restrictions Imposed by Regulatory Bodies The lending restrictions imposed by the Reserve Bank of Australia and the Australia Prudential Regulatory Authority have increased in recent times. There are restrictions in terms of interest rates, capital requirements, lending criteria, etc. This makes it difficult for business owners to easily access business loans or overdrafts. Hence, the reliance on receivables finance is easier and faster to secure. Conclusion Are you looking for a reliable finance broker to facilitate receivables finance for your business? Broc Finance can help you with their decades of experience, an expert team of loan experts, and a vast network of credible private lenders. Reach out to them for an initial free consultation. They will assess your business requirements and match you with the best lender suitable for your needs.