New research shows Aussie SMEs are cautiously embracing disruptive finance
- Written by Parnell McGuinness
New research shows Aussie SMEs are cautiously embracing disruptive finance
Recent research has found early signs that small to medium businesses are turning to disruptive solutions to solve common financing and cashflow problems. Long payment terms and difficulty accessing bank loans is driving their search for better forms of finance.
Those who have not yet explored new models are feeling the credit squeeze, with 40% accessing funds through traditional forms of debtor finance and a worrying 32% saying they would be forced to use their personal savings or equity in the family home, says the study Cash Flow Issues Drive Aussie SMEs to Disruptive Solutions published by The Invoice Market.
“The move to disruptive financing models is a clear vote against the onerous and inflexible terms banks and other types of financing levy on SMEs,” says The Invoice Market Managing Director Angus Sedgwick, who commissioned the survey, “The internet is creating efficient markets. This is an exciting time to be in business in Australia.”
Business finance can be expensive, inflexible and unsuitable
“Just over 40% of the businesses in our survey said they’d turn to traditional debtor finance, with its flexibility compared to bank finance being the key benefit,” says Sedgwick, “But there are another 60% who wouldn’t have access even to this type of factoring, due to requirements that their invoices be spread across a certain minimum number of clients or based on geographical limitations. These are good businesses, but their risk profile is just too high for the institutions. Agility and creativity is key to servicing these businesses. Online models which connect businesses with investors are just one of the ways the issue is being addressed.”
“It’s the same story in loans. SMEs in the early growth phase don’t meet the traditional debt funding qualification criteria, a situation which is only going to get worse if and when capital requirements increase. Fifty-two per cent of businesses told us they’re worried about how changes to bank capital requirements might make it even harder to get funding. So they’re looking to alternative forms of loan to fund their business. This is where peer-to-peer and crowd-funded equity-raising are really going to shine.”
Disrupters ramp up the pressure
“Disruptive platforms know that conditions are right for business to turn to them in droves. The number of disruptive finance providers entering the market has doubled over the last two years. With only 11% of businesses already looking to disruptive solutions, there’s definitely room to grow. The next boom in Australia could be driven by SMEs access to cash,” says Sedgwick.
Key findings of the report include:
- Two out of three businesses said lack of financing was affecting their ability to grow
- 52% are concerned that reforms to the banking sector are going to make it harder to get a loan
- 70% said long invoice payment terms were negatively affecting their cashflow
- The number of tech-enabled disruptive financing instruments in Australia has doubled over the past two years
- 11% of SMEs are turning to disruptive financing instruments
The embargoed report Cash Flow Issues Drive Aussie SMEs to Disruptive Solutions is available for download here.
The Invoice Market Managing Director Angus Sedgwick is available for interview.
For further information:
Parnell McGuinness, ph 0412 22 82 82, e parnell.mcguinness@
About The Invoice Market
The Invoice Market is an online auction platform which creates an efficient marketplace for invoice factoring. The platform matches businesses requiring cash flow funding with Institutional and High Net Worth “Sophisticated” investors willing to provide working capital and cash flow finance. The Invoice Market launched in Australia in June 2014 and has funded over $10 million in invoices to date.