Strong demand for invoice financing to continue

Global cash flow finance specialist, Bibby Financial Services, expects demand for invoice financing to continue to grow by around 20 per cent this year as small businesses seek better ways to manage their cash flow and more flexible business finance arrangements.

Greg Charlwood, Asia-Pacific chief executive of Bibby, reports the company’s Australian business grew by 24 per cent last year. “Throughout the global financial crisis more companies discovered the benefits of invoice financing after traditional funding became more difficult to access and cash flow tightened considerably due to slow debtor payments.

“We believe credit finance for businesses will remain in short supply for much of this year and expect that, in this environment, business owners will consider all funding alternatives, including invoice or cash flow financing,” Mr Charlwood says.

Economic outlook

Business confidence bounced back to very high levels in January 2010, according to NAB’s Monthly Business Survey & Economic Outlook. The report found higher confidence in manufacturing, finance and business services and professional and recruitment sectors.

Expected GDP growth for 2010 is 3 per cent and unemployment is expected to fall by 4.75 per cent by end 2010 and 4.25 per cent by the end of 2011, according to the recent NAB report. The RBA is expected to raise rates to 4.75 per cent by the end of 2010, with tentative expected rate rises in May, June, August and November – with a peak of 5.5 per cent in mid 2011.

Mr Charlwood noted that pressures remain. Insolvency appointments rose 2.8 per cent over 2009, which is 20.4 per cent above the level recorded in 2007 prior to the GFC, while average trade payment times deteriorated in December 2009 by 2.1 days to 53.9 days, according to Dun & Bradstreet’s most recent analysis.

These are reminders that it is imperative for companies to closely manage cash flow and other aspects of the business.

“Cash flow finance may be appropriate if the business is growing rapidly, is having difficulty maintaining terms of trade or meeting liabilities, or if it wishes to increase its competitiveness by gaining better terms from suppliers. It is useful if the funding of new sales is being restricted due to cash flow issues that can often be caused by slowing payments from clients or tightening supplier terms,” Mr Charlwood says.

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By David Olsen

An undercover economist and a not so undercover geek. Politics, business and psychology nerd and anti-bandwagon jumper. Can be found on Twitter: David Olsen - DDsD