Non-bank financing company OptiPay has reported that it has seen a 25 per cent increase in its utilisation rate for invoice financing, suggesting that Australian SMEs are facing financial difficulties.
“More of our clients are needing to access their invoice financing facility to free up cash for their business,” OptiPay CEO, Angus Sedgwick, said. “They’re feeling the impact of inflationary pressures, rent, higher interest rates and the additional burden of servicing tax debts post-COVID.”
Invoice financing provides businesses with a line of credit secured by their outstanding invoices. Typically, businesses can access up to 90 per cent of the sales value of their accounts receivable ledger while continuing to offer credit terms to customers.
This disclosure aligns with the latest data from Creditor Watch which found that cash reserves in Australian businesses are being depleted with a steep increase in payment defaults. The Creditor Watch report also noted that B2B trade payment defaults reached a record high in February with a 47.9 per cent year-on-year increase.
It is also reported that external administrations are up 24.6 per cent year-on-year with the food and beverage sector most at risk followed by publication administration and safety and accommodation.
“We’re seeing an increasing number of businesses with less cash coming in which means they’re finding it harder to pay their own suppliers,” Sedgwick said. “Those who have an invoice financing facility in place are able to better navigate this challenging time.
“Many of our clients have credit terms of 60 days End of Month (EOM) meaning, they are only paid 60 days after the end of the month in which the service or product was delivered which is a long time to have working capital tied up,” he concluded.
