Industry figures reveal debtor finance grew by 6.1% in three months to June.
Businesses facing volatility and uncertainty in the economy are increasingly turning to debtor finance as a solution to their cash flow problems, with new figures released by the Institute of Factors and Discounters (IFD) revealing a 6.1% rise in total receivables finance (also known as debtor finance) to Australian businesses in the June 2011 quarter ($15.2 billion) compared to the March 2011 quarter ($14.3 billion).
The figures also reflect a 7.3% rise compared to the June 2010 quarter last year ($14.1 billion). The total debtor finance provided to businesses in the financial year 2010/2011 was $60.6 billion.
Rob Lamers, head of debtor finance at Oxford Funding (a wholly-owned subsidiary of Bendigo and Adelaide Bank Limited) said the growth in debtor finance, especially in the SME sector, was being driven by the challenging economic environment that many businesses faced.
"With ongoing economic instability, more businesses are searching for forms of finance that can keep their cash flow under control," he said.
"Debtor finance allows them to do that, with the added appeal of using business assets, rather than real estate, as security."
A recent report on the June quarter 2011 by credit bureau Dun & Bradstreet showed that Australian businesses are taking 53.4 days to pay their bills. Dun & Bradstreet also found that the number of payments that were 90 days or more overdue jumped almost 20% compared with the June quarter 2010.
"Many Australian businesses cannot afford to wait 53 days to be paid, especially smaller businesses which have fewer resources and cash reserves," said Lamers.
"As a result, we expect the use of debtor finance to be a growing trend in Australia as more businesses become aware of its effectiveness in improving their cash flow. We have certainly experienced this trend within Oxford Funding, where our total debtor finance provided to businesses rose over 20% in the past year."
The largest users of debtor finance in the December quarter were the wholesale trade at 36% of total receivables and manufacturing at 22%. New South Wales and ACT businesses accounted for the largest portion of new debtor finance for the quarter with $5.4 billion (36%), followed by Victoria with $4.0 billion (26%), Queensland with $3.1 billion (21%), Western Australia with $1.5 billion (10%), South Australia and Northern Territory with $1.0 billion (7%), and Tasmania $41 million (0.3%).