InvoiceX (IX), Australia’s first provider of confidential marketplace invoice financing has today commended the government for a number of encouraging changes to help small businesses in the recent budget, however proactive action to address the cashflow dilemma was sadly missing. Getting customers to pay on time is a struggle for many small companies—one that can disrupt a company’s cash flow and even stunt its growth. IX is part of a new generation of peer-to-peer alternative finance firms offering small-medium sized businesses a sensible option to fund growth. The company is on track to process over $20m worth of invoices this year.
“Incentivising business owners to invest is very welcome but financing this is a major challenge. If you have no further real estate to offer a lender as collateral, like most owners of smaller businesses, how can you finance your growth? This applies especially to the build-up of working capital that is involved in growing, a critical hurdle when dealing with larger customers who take longer to pay,” said Steve Yannarakis, co-founder of IX.
According to Dun & Bradstreet, customers take an average of over 50 days to pay their bills in Australia. A typical business with revenues of $5m often has unpaid bills due from customers of over $750,000. To double in size, it would need to finance over $1.5m of unpaid bills. To make matters worse, business owners have to pay their tax in advance of collecting any profit earned.
The banking system is not increasing its cashflow lending to small businesses. According to the RBA, it has been flat-lining at $200bn since the GFC – that’s about $100,000 per business on average. Over the same period, mortgages, which represent over 95% of lending, have grown by over $400bn. Most small business owners are forced to use their credit card to bridge cashflow problems at crippling interest rates.
“What would have been helpful to small businesses are initiatives similar to those introduced recently by the UK government, where small businesses that have been rejected for loans must be referred to a panel of alternative finance providers. In addition, the British Business Bank was given £100m ($200m) to support alternative providers,” said Dermot Crean, co-founder of IX.
Using advanced computing power and a low cost structure, IX is bridging the financing gap and narrowing the spread on finance. The IX platform enables Australian businesses to raise short-term working capital by selling outstanding invoices direct to investors.
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