Debtor finance growth a result of cash flow pressure
Announcement posted by FCR (Financial & Corporate Relations Pty Limited) 05 Jun 2012
Sydney, 5 June 2012 – The latest statistics from the Institute for Factors and Discounters (IFD) for the March 2012 quarter, released on 30 May 2012, confirm the second highest factoring turnover figures on record of $1.26 billion for the March 2012 quarter, which represents a 31.4% increase on the corresponding March 2011 quarter.
At state level, growth in factoring turnover was particularly strong in NSW and the ACT, with a 99% increase on the March 2011 quarter resulting in total turnover of $234.7 million. Western Australia also saw notable growth, with a 25.6% increase leading to total turnover of $241 million.
Gary Green, National Sales Director, Bibby Financial Services Australia, said: “The consistent growth of debtor finance, particularly in NSW, confirms the increasing cash flow pressure on small and medium sized businesses outside of the mining sector.
“The fluctuating Australian dollar, the knock-on effect of the Eurozone’s economic woes, weakening consumer appetites within the retail market as well as a continuation of the ATO’s focus on arrears, are all factors contributing to a sentiment of uncertainty within the SME sector. The manufacturing sector has been especially constrained by weak domestic demand and flat commercial and residential construction.
“Due to this uncertainty, we are seeing many clients who do not wish to risk their personal property but need an increase in their lending facilities. Softening property values combined with stringent bank lending conditions might also be factors, as we are seeing many businesses that have had increases to their funding facilities refused by traditional lenders”, he said.
“However, in Western Australia the drivers for debtor finance growth are quite different. The flow on effects from the mining boom mean that businesses are struggling to deal with cash pressures to fund the many new business opportunities.
“It’s also clear that finance professionals, including accountants and finance brokers, are seeing more opportunities for debtor finance within their client bases, with referral volumes up about 23% so far this year.”
“We are starting to see debtor finance recover and continue to perform very strongly against other types of business lending. In this environment, SMEs need flexible funding solutions and strong cash flows to address the increased uncertainty, and we would urge SME owners and managers to review their funding arrangements at this time,” Mr Green said.
At state level, growth in factoring turnover was particularly strong in NSW and the ACT, with a 99% increase on the March 2011 quarter resulting in total turnover of $234.7 million. Western Australia also saw notable growth, with a 25.6% increase leading to total turnover of $241 million.
Gary Green, National Sales Director, Bibby Financial Services Australia, said: “The consistent growth of debtor finance, particularly in NSW, confirms the increasing cash flow pressure on small and medium sized businesses outside of the mining sector.
“The fluctuating Australian dollar, the knock-on effect of the Eurozone’s economic woes, weakening consumer appetites within the retail market as well as a continuation of the ATO’s focus on arrears, are all factors contributing to a sentiment of uncertainty within the SME sector. The manufacturing sector has been especially constrained by weak domestic demand and flat commercial and residential construction.
“Due to this uncertainty, we are seeing many clients who do not wish to risk their personal property but need an increase in their lending facilities. Softening property values combined with stringent bank lending conditions might also be factors, as we are seeing many businesses that have had increases to their funding facilities refused by traditional lenders”, he said.
“However, in Western Australia the drivers for debtor finance growth are quite different. The flow on effects from the mining boom mean that businesses are struggling to deal with cash pressures to fund the many new business opportunities.
“It’s also clear that finance professionals, including accountants and finance brokers, are seeing more opportunities for debtor finance within their client bases, with referral volumes up about 23% so far this year.”
“We are starting to see debtor finance recover and continue to perform very strongly against other types of business lending. In this environment, SMEs need flexible funding solutions and strong cash flows to address the increased uncertainty, and we would urge SME owners and managers to review their funding arrangements at this time,” Mr Green said.
ENDS