How Fintech Can Help SMEs Succeed in a Challenging World

Australia’s 2.1 million small to medium enterprises are the backbone of the country’s economy, employing over 7.3 million people or about 68% of Australia’s overall workforce. Unfortunately, the COVID-19 pandemic has made the situation difficult for SMEs to thrive; some businesses have been forced to close entirely or temporarily as demand plummeted during the pandemic. As reported by the Australian Bureau of Statistics in mid-June, around 70% of SMEs reported a decline in revenue relative to the same time last year. 

Why Innovation is Essential

The Australian government aims to assist SMEs through supporting cash flows and encouraging lending, but the demand for bank-based finance appeared low, with SMEs reporting that access to finance from banks is difficult. According to Connolly and Bank (2018), SMEs have found it challenging to access finance because banks require collateral (often in the form of property) and/or personal guarantees (linked to assets). On top of that, the availability of credit for businesses has tightened due to the ongoing crisis.

In a COVID-stricken world, financial technology (fintech) presents a range of superior, more useful and faster options for SMEs than old-fashioned banking. Paperwork is now digital and more accessible with quick approvals and disbursement compared to traditional lending. Online non-bank lenders have sprouted rapidly to fill the growing market need for straight-forward, efficient financing. New ways of lending and conducting financial affairs are challenging the existing infrastructure and traditional methods of doing business. Here are two key ways fintechs are helping SMEs succeed in a challenging world: 

Invoice Financing

A sudden increase in cases of overdue B2B payments is a hard hit for SMEs. According to research, Australian businesses receive their payments consistently late – almost ten days behind, to be exact. 96% of SMEs, as recorded by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), are affected since this is more than a full third longer for their businesses who are on 30-day terms.

To address this problem, fintech companies introduced invoice financing technologies tailored for SMEs, intending to decrease the impact of overdue B2B payments. Invoice financing facilities aid businesses by being able to access funds against issue invoices that have not been paid yet. In most cases debtors only pay invoices in 45-60+ days. Invoice finance allows SME’s to access up to 90% of the invoice value upfront (within 24 hours of verification) with the balance received when the debtor pays, less a small discount fee (equivalent to giving your customer an early settlement discount). 

Invoice finance gives your business the working capital it needs while allowing you to retain full control of your sales ledger, as well as the relationship with your customer, and also with no need to give property as security. 

In the future, there are two fintech-based methods to innovate this space further:

  • Blockchain technology – An example of this is a blockchain-based-invoice-funding that businesses will be able to use to sell B2B invoices globally. The goal is to enable lower transaction fees, faster B2B payment processing, and enhanced business security. Another approach allows for SMEs to upload encrypted invoices to a blockchain-based platform; uploaded invoices can be traded or used to build a financial track record.
  • Artificial Intelligence (AI) – By providing a score of a buyer’s likelihood to pay SMEs’ pending invoices, AI assesses risk and expedites financing, allowing funders to instantly lend funds to SMEs, enabling them to manage their cash flow better.

Cloud Accounting

Cloud accounting allows you to keep your business books online, making them accessible anytime, anywhere, from any device. Fintech uses this technology to improve data aggregation, self-service application, and security. Unlike traditional accounting software, cloud accounting keeps data in the system up-to-date, is easily accessible on multiple platforms, makes collaboration more comfortable, and ensures you do not need to worry about installing updates. Most importantly, it automatically creates backups for your data.

With the enormous contribution of SMEs in the Australian economy, it is best to provide them with an option to help them access loans and scale up their business, especially during this crisis. Though Australia’s Fintech Industry Association reported that non-bank funding is now the number one option for SMEs, keep in mind that not all fintech-based advancements are created equal. Make sure to choose one that serves your business’ best interest. 

OptiPay helps SMEs source the funds they need to support their current operations, meet their expenses, and invest in their growth. Get the cash you need and make OptiPay your partner for flexible business financing today.

Who is OptiPay?

OptiPay, one of Australia’s leading business finance providers, has been dedicated to helping small business owners solve cash flow challenges  for over a decade and has provided $1.5 billion in business funding to more than 500 Australian businesses. OptiPay specialises in modern financing solutions such as invoice factoring, invoice finance, debtor finance, and lines of credit. OptiPay’s mission is to support business growth providing liquidity in as little as 24 hours, ensuring they have access to tomorrow’s cash flow today. This rapid access to funds helps businesses maintain smooth operations and seize growth opportunities without the stress of cash flow constraints. At OptiPay, we believe that healthy cash flow is the lifeblood of any successful business. Our commitment to helping businesses overcome financial hurdles and achieve their growth ambitions has solidified our reputation as a trusted partner in the business finance sector. Whether you are looking to stabilise your cash flow, expand your operations, or navigate financial challenges, OptiPay is here to support your journey with innovative and efficient financing solutions.

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