Is this the ‘canary in the coal mine’ for a small business cashflow crisis?

The people that small business owners turn to for independent advice believe that cashflow management and access to finance are only getting harder for SME businesses.

A recent poll of the finance broker community, commissioned by invoice finance specialists Apricity Finance, has demonstrated that the key challenge of cashflow continues to drive the demand for small business finance – something that is becoming increasingly difficult to access after the Banking Royal Commission.

With brokers being one of the first places that small businesses turn to when looking for finance, they get a unique view into the issues faced by the sector.

The research demonstrates that 70 per cent of brokers agreed that cashflow is ‘definitely more’ of a problem than it was for small businesses 12 months ago, and 92 per cent of brokers believed that finance was ‘more difficult’ to get since the Royal Commission.

Linden Toll, CEO at Apricity Finance said the Banking Royal Commission has almost created a perfect storm scenario for small businesses, with the increased need for finance, but then the increased challenge in accessing it from their go-to tier one banks.

“We work closely with finance brokers and we believe they have a unique view on small businesses. Like the canary in the coalmine, the trends that brokers see across the SME sector can often be indicative of longer-term problems,” he said.

Small businesses in a squeeze

Talking about the size of the businesses suffering the most, the research showed that the broker community agreed that the most likely to suffer from cashflow problems was those with an annual turnover of less than $5million – meaning the majority.

Mr Toll continues: “Our research has shown that brokers are concerned about the increasing number of small businesses suffering from cashflow challenges and the capacity of those businesses to access finance in a post-Royal Commission landscape. And that these cashflow concerns are largely driven by late invoices or long invoice payment terms, with more than two thirds (68 per cent) agreeing that chasing invoices and long invoice payment terms are the main causes for cashflow issues.

“Small businesses are hugely important to the Australian economy and employ more than four and half million Australians, more than those employed by the whole of the ASX 200.”

This is a sentiment echoed across the small business sector with the Australian Small Business and Family Enterprise Ombudsman(ASBFEO) stating similar findings in their report* in April 2019. Kate Carnell, the head of the ombudsman, and ex Chief Minister for the ACT, stated: “We received over 2,400 surveys from small and family businesses across the country raising issues on late payments and long payment times.”

“Where large corporations delay payment to their small business suppliers, small business cash flow is unpredictable and presents significant difficulties in their ability to access and service finance. Cash flow is king to small business – poor cash flow is the primary reason for insolvency in Australia.”

Linden Toll continues: “The implications of poor cashflow are well documented. Falling short on debt obligations, diminished competitive advantage, not being able to pay salaries being some of many.”

Any small businesses who believe cashflow could becoming and issue is recommended to act early and take the necessary steps to ensure they don’t fall into the 40% of businesses who don’t make it into their fourth year.

-ENDS-

For more information on this story or to arrange an interview with Linden to discuss the result of the research and recent threats to small businesses via cashflow challenges, as well as the opportunities to overcome cashflow challenges, please contact:

Dan Stewart at dan@brightus.com.auor +61450 008 034.

Note to Editors

***https://www.asbfeo.gov.au/news/news-articles/large-corporations-reluctant-reveal-payment-time-performance

About Apricity Finance

Apricity specialises in a single product – known as invoice finance (or debtor finance).  Their solution allows approved businesses to have the invoices to their high credit quality customers paid faster. This reduces frustrating wait times and provides cash flow certainty.  Founded by a team of experienced investment management and finance professionals, the first office opened in New South Wales’ Southern Highlands in 2013. In 2016, Apricity opened offices in Brisbane, Melbourne and Auckland.