As we announced our re-branding to OptiPay this week, we talked about the need to provide suitable growth funding for Australian businesses.
The fact is that while the economy has been growing for a decade, the business failure rate jumped a notch last year. The 12.7% increase in failed businesses in the Australian market is not just the result of heightened competition from new businesses at home or market entrants from abroad.
Another problem is that the start-ups that entered the market in large numbers following the financial crisis are getting to the point where they need to grow, or are in fact growing fast: and that brings with it many dangers. Established businesses may also be in danger of running into financial difficulties as a result of growth.
Growth Can Strain Cash Flow
Cash Flow problems are the biggest killer of small businesses. It is counter-intuitive, but growth – especially rapid expansion – can put more strain on your cash flow situation. This is because, inevitably, you have to pay out money on extra staff, supplies and other business necessities before you can deliver on new contracts and eventually get paid.
With clients in the B2B world paying anything between 30 and 90 days after receipt of an invoice, that cash flow gap can be huge and without suitable finance in place to cover it, it can swallow otherwise viable businesses and send them into administration before they ever get to enjoy the fruits of the growth their owners had worked so hard for.
There are other problems associated with rapid business growth. Supply chains can become strained, skills gaps can appear, and inexperienced entrepreneurs can suddenly find themselves out of their depth as they move from leading a start-up to managing a medium-sized enterprise.
Innovative Funding is Available
The issue of experience and cash flow is not entirely unrelated. The fact is, suitable finance to plug the cash flow gap and ensure your business has a healthy balance to trade on is available: just look at the range of business funding solutions OptiPay offers. The problem is, business leaders often don’t know about the various innovative forms of funding that are designed to manage cash flow and help businesses to grow by using their own money, or money that will soon be due to them.
Invoice Finance, Trade Finance and Supply Chain Funding all belong to this very useful category, but many businesses are not using them. Instead, there is still a reliance in Australia on bank finance which has been hard to come by in the years since the credit crunch.
Not only that, the traditional business loan is not designed to facilitate cash flow management. Indeed, by adding the strict requirement for regular re-payments to an enterprise’s growing list of expenditures, a loan can make the cash flow situation worse.
Given all of the above, it is not surprising to see the business failure rate accelerating following a decade of economic growth that also saw many new entrants crowd the market – vying with each other both for business and funds.
It is, however, a great shame, because most of these businesses are profitable and don’t deserve to go under.
That’s why we are growing too, and expanding our range of business funding products aimed at healthy trading businesses. If your business is turning over at least $100k a month and is looking to expand, we would love to discuss how OptiPay can help your business with innovative cash flow funding solutions, such as Invoice Finance, Trade Finance & Supply Chain Funding. Our solutions not only ensure you have enough working capital and can bring in supplies, they put your business on a safer footing and provide growth funding at a surprisingly low rate.
Get tomorrow’s cash flow today.