Australia has a surprising number of small to medium size manufacturers. The next stage is help more of them to become larger businesses, and for that they will need money to invest. Cash flow financing can help.
The manufacturing sector has been thriving for the last decade despite all the problems that the wider economy has thrown its way. The number of manufacturing companies in Australia has stayed largely unchanged at around 47,500 for the last five years.
That figure may surprise some people outside of the sector, who imagine that industry is dominated by a few big corporations running giant factories. Nothing could be further from the truth: according to the Australian Industry Group’s Australian Manufacturing in 2019 report, 87% of Australian manufacturing businesses employ fewer than 20 people.
The Need for Growth
On the one hand, this small business powerbase is at the heart of Australian manufacturing’s success. Even though individually they employ just a few people, collectively they are an extremely valuable source of jobs, forcing income, and profitable activity. The Australian Industry Group forecasts a strong recovery in manufacturing jobs over the next three years.
The best thing about this small business powerbase is the potential within: some of these firms should be moving into the medium-sized category as they turn their success so far into growth. That is the way small businesses really create jobs and wealth, and why they are so valuable (big companies, on the other hand, often shed jobs in favour of profits).
The ‘fast growth stage’ that sees small businesses become medium-sized ones is the real driver of wealth and jobs. As things stand, just 7% of Australian manufacturers employ between 20 and 199 people.
The Need for Investment
Running a manufacturing company is far from easy, so it is safe to assume that the 87% of manufacturers which remain small lack neither ambition nor drive.
Experience, expertise, and contacts are all possible areas to address. As with all sectors, help is available to ambitious firms with high potential, and business owners are well advised to seize the available opportunities when it comes to adding proven experience to their boards.
Another crucial factor stopping more of these smaller businesses joining the mid-sized category is financing.
Positively, manufacturing CEOs surveyed by the Australian Industry Group reported increased spending on technology, training and capital investment since “at least 2016.” However, there’s evidence elsewhere that investment tends to be heavily concentrated: “5% of firms drive 94% of the sector’s entire capital spending and 54% of its entire R&D spending,” according to a study published in 2017 by the Advanced Manufacturing Growth Centre.
Invoice Finance is Ideal for Manufacturers
Why are 95% of manufacturers not investing? In many cases, because they can’t access finance at an affordable rate, or in a way that doesn’t present a risk to their business. Business loans, whether from banks or alternative lenders, those without a good credit record, or assets to offer as security, are often locked out or charged rates which would render growth unprofitable.
For those firms in particular – but also for many that can and do have business loans – Invoice Finance offers a great way to fund steady growth. Invoice or Debtor Finance as its known, brings forward money tied up in accounts receivable so that a business no longer has to wait 30, 60 or even 90 days for their customers to pay them, as they can access the funds within 24 hours of invoices being approved. The Financier then waits for the invoice to be paid. All this for a very small discount fee or percentage of the invoices value. Invoice Finance not only grows with the business, by offering upfront cash based on how much revenue or invoicing a business does each month (it is not based on profits), but it is also is far cheaper than a non-bank loan that requires principal and interest to be repaid down over a fixed period of time.
For manufacturers wanting to find out how invoice finance could help them grow, contact OptiPay now. We are experts and can offer a comprehensive, tailored package on our smart fintech platform, to get you the funding you require, quickly.