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Growth in business insolvencies fueling cash flow woes

Announcement posted by Oxford Funding (Bendigo Bank) 07 Mar 2011

High profile business failures putting the squeeze on small businesses

While 2010 may have been the year of the start up with Dun and Bradstreet reporting a large growth in the number of new businesses, higher interest rates, high profile insolvencies and lengthening debtor days saw 23 per cent of businesses fail.

Cash flow, or the lack of it, was a key contributing factor to business failure, with the continued credit shortage leaving many small businesses unable to meet operational expenses.

While business groups with up to 19 employees experienced the most significant increase in failure rates from 2009, larger businesses conversely experienced a decline in failure numbers.

Rob Lamers, chief executive officer of debtor finance specialist Oxford Funding (a subsidiary of Bendigo and Adelaide Bank Limited) says that compared to larger businesses, many small businesses face more challenges in overcoming a rough patch.

“With capital and other resources typically being less accessible for many small businesses, they may need to look to less mainstream financing options such as debtor finance, which can often be more appropriate for businesses in certain industries.”

Lamers explains that with debtor finance, outstanding debts which are the curse of small businesses can be turned to their advantage.

“By leveraging their debtors’ book for cash, businesses are able to use funds up-front to reinvest in the business for growth without being restricted by slow payers.”

Recent data from the Institute of Factors and Discounters for the December 2010 quarter point to a 7.4 per cent increase in debtor finance on September 2010 figures, with total debtor finance turnover reaching $16.1 billion for the quarter.

The annual turnover for the 12 months to the end of December 2010 was $58.7 billion.

The biggest users of debtor finance in the December quarter were the wholesale trade sector at 34 per cent of total receivables and manufacturing at 21 per cent.


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