Why are Invoice Financing Volumes So High in Australia?

Why are Invoice Financing Volumes So High in Australia?

This past year, global invoice financing volumes reached USD$3.1 trillion, a staggering 20% change according to Factors Chain international.

Receivables finance growth was particularly drastic in Australia (Sitting at AUD $73.7 billion), driven primarily by banks and second-tier providers in the sector.

Asia Pacific growth was also up 18%, with a particular increase in China. (34% to €405.5 billion).

A volatile economic environment and tightening regulation on the banking sector (largely brought on by inflated property asset values and unsavoury lending practices) is exactly why invoice financing volumes have increased so drastically thanks to the entry of alternative providers—suppliers are experiencing delayed payments from buyers and in turn, buyers are doing it tough sourcing efficient working capital from banks.

Banks have recently been accused of “relentlessly acquiring new business” by offering business loans with CBA committing “25,000 breaches of the Corporations Act” according to SMH

What has become clear is the level of scrutiny placed on banks has had a flow of effect to businesses seeking funding.

A recent Sydney Morning Herald article uncovered that many big large corporates are asking suppliers to give them as many as 120 days to pay their bills, crippling small businesses and turning them into lenders.

“Mid-sized Australian businesses owe $8 billion in late payments to suppliers” – SMH

Businesses need to get paid early but, often, they find themselves trapped in this unforgiving setting which forces them to go out to the market and agree to unfavourable terms involving unsecured high-interest rate loans, cash-draining repayment terms, and long-term contracts.

How do businesses find the right funding, at the correct terms, while deciphering the true cost of contracts?

It’s obvious that businesses need access to affordable short-term financing: invoice financing and supplier funding.

If buyers paid suppliers earlier by accessing funds locked up in receivables or could advance payments for inventory orders, they’d cut out the need to take on expensive debt (factoring and unsecured fixed-term lending firms and all their binding contracts and interest rates that go with it); suppliers would get better, more reasonable rates; and buyers would save a lot of money by funding invoices or purchase orders early.

No business should be subject to predatory lending practices, especially if there are alternative options out there, like supplier funding options, readily available to them.

See if Stak can help with your supplier payments.

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We regularly share our thoughts on trade finance, lending, company culture, product strategy and design.

Stak works with clients that sell to some of the largest buyers in Australia & overseas.

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