A leading finance broker has said that 75 per cent of SMEs are cash-strapped, but brokers can be the key to unlocking finance and keeping them afloat.
According to Kevin Wheatley, the managing director of Bayside Residential & Commercial Mortgages, the current business and economic environment is “very tough” for SMEs, with up to “75 per cent” being cash-strapped due to late payments from creditors.
However, he outlined that brokers can radically improve their cash flow by understanding their business payment structures, balance sheets and aged trial balances.
Speaking on the Elite Broker podcast, Mr Wheatley elaborated: “I quite often will say to the SMEs: ‘Look, you’ve been trading for 18 months or two years, let me have a look at your aged trial balance. I want to see where your debtors and creditors ledgers are sitting.’
“Because a good 75 per cent of SMEs are cash-strapped, because their creditors are holding them out by 60-90 days. [If we can] bring that ledger back into 14-21 days, that’s going to enable an improvement for their cash flow,” he said.
Mr Wheatley added: “The biggest issue that confronts SMEs is constant cash flow issues. If they’re a manufacturer (or more so logistics companies), transport companies, truck drivers, people in those sectors... cash flow finance is a wonderful tool for them to use.”
As a commercial finance broker with a background in logistics consulting and international commodities trading, Mr Wheatley has said that offering a diversified service and a broad range of funding options has helped his broking business thrive.
Mr Wheatley advised: “What you need to look at is the ancillary opportunities. If you’re putting a self-managed super fund together, or an SMSF loan for an individual or a couple, you’ll generally find those people have their own self-managed funds, and they’re generally self-employed.
“The ancillary opportunity comes from those clients, because it’s not just residential property or investment property [they’ll have], but they may be a manufacturer, they may be an HR company who require other types of cash flows.”
He elaborated: “I love working with recruitment companies… where we can provide debtor invoice facilities for them to free up their cash flow. Engineering companies, export companies, [they] allow us to put trade facilities together for them.”
According to Mr Wheatley, the key for being successful in business finance (as in residential finance) is to know as much as you can about a client.
“Once you know as much as you can about your client, you will then work out where those ancillary opportunities are going to come from, and you can put suggestions forward to the business operators and those suggestions can offer alternative funding lines for them that they haven’t thought about in the past,” he said.
Further, the finance broker asserted he was “very anti-overdraft” and always recommends that smaller growing businesses should consider debtor invoice facilities, because it enables them to grow their business “on the back of a debtor invoice facility”.
According to Mr Wheatley: “Banks tend to want to see an overdraft contract rather than expand, so an overdraft is certainly not good for any growing business.”
He added: “You can negotiate cheaper costs when they’re purchasing the costs of goods, for whatever it is that they’re producing or manufacturing, by having the capability to pay for their suppliers earlier and upfront.”
“They can pick up a 10 or a 15 per cent discount in the purchases, so that works for the business, but you can’t do that with an overdraft, and an overdraft is the facility,” Mr Wheatley concluded.
Ezekiel is a journalist on the mortgages, property investment and wellness titles at Momentum Media.
Before joining the team in 2019, he was a freelance journalist for Vice Australia, Pulse Radio and the Sydney-based travel publication Global Hobo, among others.
Ezekiel studies a double Bachelor of Communications and International Studies at the University of Technology, Sydney.
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