Promoted by The Invoice Market.
Australia is blessed with a large and thriving small business community: the country’s two million small and medium-sized enterprises (SMEs) employ almost 70 per cent of the workforce and account for over half of private sector output. SMEs are therefore a major source of innovation and growth in the economy. Yet this key sector is too often forgotten or overlooked, to its own detriment and everyone else’s. The Invoice Market outlines how brokers can ease this burden by offering alternatives to bank funding.
Despite recent efforts to tackle abusive bank practices, many borrowers are still struggling to get the funding they need. SMEs, for instance, when they do access loans, typically pay significantly more than home owners.
With plans afoot to cut commissions from some of Australia’s biggest banks, branching out into new forms of financing has never been more attractive for finance brokers. But how easy is it for brokers who’ve spent their careers arranging residential property funding to find value in other areas?
Angus Sedgwick, CEO of cash flow finance company The Invoice Market (tim.), says that the answer is already sitting in every broker’s contacts book.
He says: “Self-employed people and business owners make up around 40 per cent of the average mortgage broker’s book, and this represents a huge untapped opportunity to service their commercial funding needs as well as their home borrowing.
“Perhaps not unlike brokers, small and medium-sized business owners have been getting increasingly fed up with the behaviours of Australian banks and are seeking alternatives to traditional business loans and overdrafts. Offering these clients advice and access to debtor financing is an ideal proposition to brokers because the premise can be so simple: Anyone used to comparing the intricacies of varying mortgage products will easily be able to assess the costs and benefits of a business using their business ledger rather than a debt solution.”
There are many kinds of debtor or invoice financing available. With flexible, online invoice financing like one provided by tim., businesses can raise as much or as little as they need at any given time. Once a tim.cash flow facility is established for a client, the client selects which invoices, which debtor and how often they would like to offer invoices for funding within their facility limit, with no ongoing fees, arrangement fees or interest repayments to factor into the cost calculations.
Who can brokers target with debtor funding solutions?
Invoice financing is suitable for most successfully trading businesses that sell to commercial clients. Payment terms between businesses almost always involve a lengthy wait of 30 to 120 days after an invoice is received. Many business owners do not yet understand the power of accessing these funds early and how it can provide a whole new way of covering their business funding needs that can be a real alternative to expensive borrowing. Brokers should therefore start conversations with business owner clients to see how they can help, particularly given the significant development of funding solutions including invoice funding, supply chain funding and import finance.
How does invoice financing compare to bank loans?
When calculating the cost of loans, you must take into account all the small print, set-up fees and other costs as well as the annual interest. Invoice financing is much simpler: it’s based on a fixed, pre-agreed fee and isn’t a debt on the balance sheet. Many brokers are learning that the cost for this type of funding can be sub 10 per cent per annum.
Is it risky?
No. Non-payment of invoices is a risk (as it would be even if they weren’t funded), but with tim.Secure, tim.’s bad debt protection policy, failure of the debtor is insured. Most importantly, there’s no need to plan for repayment as there are no repayments. In fact, tim.’s customers make no payments to tim.at all; they receive the final 20 per cent of their invoice – 80 per cent having been funded up front – when it’s paid, less the pre-agreed discount fee.
The benefits of commercial loans
What kind of loans do you offer clients?
I offer invoice financing and supplier payment funding through The Invoice Market (tim.).
We are currently developing a new product between tim. and Lasso Logistics to assist the financing of importation of products. This is a revolutionary new product, which assists businesses to bypass wholesalers in Australia (who import the products anyway) and purchase direct from the manufacturer overseas.
What kind of commercial loans are you seeing lately? Are there any themes in the clients/loans/securities, etc.?
The commercial loans I am seeing a great level of interest for is where clients want to start importing products from China. The problems of importing from China are:
- a) Ensuring that the product specified is what you are going to get. There may be quality-control issues and incorrect specifications.
- b) Total cost landed in Australia is unknown due to exchange rate risks, extra costs on the port, etc.
- c) It may be cost-prohibitive due to the expense of importing a whole container of a single product, because funding can be an issue due to the risks.
The new facility developed by The Invoice Market and Lasso Logistics overcomes this issue because:
- a) Lasso finds the manufacturer for the client (if needed); otherwise, Lasso can work with an existing manufacturer.
- b) Lasso performs a quality-control check at the factory and the product is approved by the client before it leaves the factory.
- c) Lasso provides an all-inclusive price landed in Australia.
- d) The Invoice Market funds the entire container less the client’s 15–20 per cent deposit.
What are the main advantages of writing commercial loans?
The main advantages of invoice financing and supplier payment funding through The Invoice Market is that you will get a Letter of Intent of the proposed facility limit within 24 hours.
What are the challenges of writing commercial loans?
Getting the information from the client in a timely manner because business owners tend to be too busy to collate the paperwork required. With The Invoice Market’s online portal, the entire application, documentation collection, invoice management and reporting is simple, fast and efficient.
Why do you use The Invoice Market?
They are easy to communicate with. If there is an “outside-the-box” funding requirement, the CEO, Angus Sedgwick, is always available for my call to assist the client.
How has The Invoice Market helped your clients?
One of my clients was looking to import a light system from China. The client purchased the light system for $65 from an Australian wholesaler (who already imports the product from China).
Through the joint venture between The Invoice Market and Lasso Logistics, the product was able to be sourced at a per unit price, landed in Australia (inclusive of finance, quality control, freight, insurance, etc.) at only $35. This was a 46 per cent saving, with a total saving in excess of $40,000 for the client.
The total container cost of $50,762 will be funded by The Invoice Market less 15 per cent client contribution.
Lasso had the sample in hand for the client to inspect and approve before we pressed the button on the finance and importation.
director of business sales Strategy 180