A record number of Australian small businesses are ditching traditional bank loans to fund growth and generate cashflow. OptiPay, formerly TIM Finance, provides cashflow solutions to Australian businesses, with “innovative” funding solutions such as invoice finance, inventory finance and lines of credit.
OptiPay says it has noted a two-fold increase in businesses inquiring about invoice financing compared with the same time last year, with most of the interest from the manufacturing and wholesale trade industries.
“Around 75 per cent of businesses who come to us looking for invoice financing need the extra cashflow because they’re in a period of high growth,” OptiPay CEO Angus Sedgwick said.
“Traditionally, business owners were limited with their options for business finance, and a bank loan was the go-to solution, but Australian SME owners are wiser in 2022 and they’re realising there are other options.”
Invoice finance allows a business to access cash against the goods or services they’ve already sold to their buyers but are waiting until the end of the agreed credit period to receive payment.
“In other words, it converts an asset on the balance sheet – being their accounts receivables from non-performing assets, as they get no return on those funds while waiting to get paid – into a performing asset, being cash that can be used to drive growth of the business,” Mr Sedgwick said.
“Unlike traditional debt products, there are no repayments that the business needs to factor into their cashflow, as the financier gets repaid when the debtor makes payment of the invoice.”
A recent report from Judo Bank says nearly half of Australian SMEs are seeking to grow their business, but one in four have been turned away from accessing new funding.
The report also points to the finding that banks are taking an average of 42 days to discharge loans when an SME switches lenders, inhibiting quick access to funds.
“The problem some businesses run into with a bank loan is that they’re growing so rapidly over a six-month period that suddenly the approved loan isn’t enough, and it can be virtually impossible to get that loan increased,” Mr Sedgwick said.
Queensland based functional food manufacturer Temple Foods sought the services of OptiPay during a period of extreme growth.
“We required access to additional funding,” founder Shaun Ambrose said. “Instead of getting a business loan, [Mr Sedgwick] and his team were able to allow us early access to our invoices, instead of waiting for our clients to pay us on terms. OptiPay also allows insurance of debtors, which gives us greater security.”
Mr Sedgwick says the best type of business for OptiPay to take on is a growing one.
“They’re running efficiently, they’ve got good cashflow and they’re making strong sales,” he said.
“Unlike a bank, we don’t look at your historical financial performance and are not focused on your debt-to-equity ratio and serviceability. We instead look at what your current sales are.”
