Cash flow fears fuels debtor finance growth

•  Latest IFD figures reveal more businesses are turning to debtor finance to smooth out cash flow as interest rates and bad debtors bite.

• Debtor finance grew in the three months to September to $15 billion, up 6.3% on the June quarter

Worsening cash flow conditions fuelled by an increasing number of businesses going under, lengthening debtor days and higher interest rates has contributed to a rise in total debtor finance turnover for the September 2010 quarter by 6.3% to $15 billion, compared to $14.1 billion in the June 2010 quarter, according to a new report by the Institute of Factors and Discounters.

Rob Lamers, chief executive officer of debtor finance specialist Oxford Funding (a division of Bendigo and Adelaide Bank Limited) said: “Despite the strengthening economy, the recent interest rate rises is starting to impact the ability for businesses to pay suppliers on time creating an uncertain cash flow climate for many businesses across Australia. This has to some extent attributed to the healthy 6.3% growth in debtor finance this quarter.”

“By leveraging their debtors book for cash, businesses have been able to use funds up-front to reinvest in the business for growth without being restricted by slow payers. As the economy recovers and businesses see an increase in sales and corresponding debtor levels, we expect to see the debtor finance industry enjoy further strong growth,” said Lamers.

Invoice discounting turnover accounted for $14.1 billion and factoring turnover was $0.9 billion. The biggest users of debtor finance in the September quarter were wholesale trade at 31% of total receivables, followed by manufacturing at 21%, property and business services at 11% and labour hire at 10%

“Despite the fact that the number of customers using the service is down from the previous quarter (5,251 compared to 5,366), the size of the debtor book has grown from $6.5 billion for the June quarter to $6.9 billion for the September quarter, indicating that larger businesses are starting to embrace debtor finance,” said Lamers.

-- ENDS –

About Oxford Funding

Oxford Funding, a wholly owned subsidiary of Bendigo and Adelaide Bank Limited (ASX: BEN), is a specialist provider of debtor finance or cash flow solutions to small and medium enterprises. Since its inception in 1994, the company has continued to remain at the forefront of the Australian debtor finance industry due to its flexibility, innovative product portfolio and commitment to best practice service delivery. Oxford is a member of Factors Chain International (FCI). www.oxfordfunding.com.au