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Update: The Australian and New Zealand operations of Bibby Financial Services were acquired by Scottish Pacific Business Finance in late 2015 to create Australia’s largest non-bank invoice finance specialist. Welcome to our website.

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Looking Beyond Home Ownership To Fund Business Growth

Looking Beyond Home Ownership To Fund Business Growth

The phrase “Death Valley Curve”, where new or rapidly growing businesses often struggle to secure enough working capital to sustain their growth, will be familiar to accountants.

A business may win major clients or orders, but having to wait up to 60 days to get paid puts enormous strain on cashflow, given the business has to pay for the extra staff required, and extra orders made, to fund this expansion…

Business owners typically look to the banks for overdraft facilities to enable them to bridge the cashflow gap, and this may well be the answer provided there is real estate available to offer as security and there is sufficient equity.

Stalling property values and the continuing decline in the percentage of the population owning their home outright (a 25 percent drop between 1996 and 2014) requires business owners to look for alternative ways to fund growth.

Debtor finance (also known as invoice finance) is an increasingly popular and price competitive, solution to counter the requirement to use property as security for working capital.

This is an attractive option for high growth businesses that sell on credit terms, as the business receives an advance on money it’s already owed and the funding available grows in line with sales, rather than being limited by the value of a real estate that is unrelated to the business, so there is no requirement to continually re-negotiate the limit.

It works like an overdraft, but without the need to provide bricks and mortar as security.

It gives a business owner improved buying power by allowing them to negotiate supplier discounts for early payment, and is a way to fund growth without having to offer costly settlement discounts.

For business owners and their accountants, who may be unsure of committing their entire receivables book to a facility, there is an opportunity to test the waters with Selective Invoice Finance, an on-demand line of credit secured by one or more outstanding sales invoices.

A recent selective facility we provided to a Queensland mining services business is typical of the power it provides for growth, giving them the confidence to take on much larger clients and leading to a 30 percent increase in turnover during the first six months of the facility.

Globally, the debtor finance industry has evolved considerably over the past few decades.

Scottish Pacific is leading the way in the Australian and New Zealand markets with over 1700 clients, with facilities ranging in size from $20,000 to $70m and a recent ASX listing capitalised at more than $500 million.

This development enables large and small businesses to secure flexible facilities at competitive prices, without the restrictions of bank-type covenants.

There is also increasing interest from our network of accountants both in Scottish Pacific as a business and in how invoice finance can provide the working capital required to assist their clients to grow safely and avoid the perils of the death valley curve.

With Bad Debts Rising, SMEs Advised To Protect The...
Scottish Pacific Group Lists On The ASX

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