SP 30yr AUS

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.


Recent Scottish Pacific Business Finance posts

The Small Business Dilemma of Selling to Major Retailers


Selling to big name retailers like ALDI, Woolworths, Coles and Bunnings can be a huge opportunity for small businesses. These major chains can be very profitable customers and fantastic for getting your product and brand in a more visible space. 

But there’s a dilemma. With extended payment terms that favor major retailers, many small businesses don’t have the confidence to take on these large contracts for the simple fact that they don’t have the finances in place to fulfill the orders. 

In this post, we’ll look at the potential these types of relationships have for Australian SMEs and how they can feel confident in supplying big retailers.


The Success of Hinkler Books

A good example of a small business that’s capitalised on this opportunity is Hinkler Books, a Melbourne-based book company that also sells arts and crafts, as well as musical instruments. They’ve been selling to ALDI since 2004 and have had their products featured in ALDI’s specials aisle — an assortment of products that changes twice weekly. ALDI’s specials run the gamut and have included everything from 3D printers and home security systems to floor cushions and traffic cones. 

Over the years, Hinkler Books has had tremendous success partnering with ALDI. Cara Waters, small business editor at The Sydney Morning Herald, mentions that certain products from Hinkler Books have resonated extremely well with ALDI shoppers, with some examples including a ukulele and a paint-your-own rock kit. 

This along with selling over 1 million books in 2018 resulted in Hinkler Books pulling in $3.5 million in sales from ALDI’s store last year — about 10% of their overall turnover. 

“What ALDI has done for our business is given us an opportunity to really understand their customers and create products for them, and that’s been incredibly rewarding, says Nadika Garber, managing director at Hinkler Books. “We wouldn’t have been able to sell 1 million books if not for ALDI.”


The Success of Trendpac

Another partnership that’s proven fruitful is the one between ALDI and NSW-based manufacturer, Trendpac. It’s a family run company that has benefited greatly from the relationship, and being a supplier to ALDI has been instrumental to Trendpac’s success. 

Managing Director Steven Hyde says “the manufacturer, which was started by his father in 1963, has been supplying ALDI since it first opened in Australia, with products ranging from household cleaning goods to mouthwash, shower gel, shampoo and soap,” Waters writes. 

In last year’s financial year, Trendpac generated $75 million through its partnership with ALDI, which was nearly half of its overall turnover. 

These examples show just how lucrative it can be for a small business to sell to major retailers and why it’s important to capitalise on opportunities whenever they present themselves. Not only can it lead to dramatically bigger profits, it can help SMBs build brand equity and gain a positive reputation in their industry.


A Common Dilemma

Companies like ALDI, Coles, Woolworths and Bunnings are all good potential customers. But the extended payment terms they offer is prohibitive to small businesses. Historically, it hasn’t been uncommon for major retailers to have net 60 payment terms or longer. Combine this with late or unpaid invoices — something 62% of Australian business have encountered in the past year — and it can create a real financial strain. 

In many cases, SMEs have the opportunity to supply products to big-box stores and want to sell to them, but they’re unsure if they can fulfill the orders. And if they have to wait several weeks or even months to get paid, it can bring their cash flow to a halt. 

So what can Australian businesses do to have confidence in supplying these big retailers?


Debtor Finance to the Rescue

Also known as invoice finance or invoice factoring, debtor finance is a viable solution for small to medium sized businesses. And the concept is simple. Small and medium businesses can use their outstanding accounts receivable as collateral for a line of credit. 

Debtor finance involves a relatively standard three-step process. 

Step 1. A business submits their invoices to their financier as well as their clients.

Step 2. They will receive up to 95% of the value of approved invoices.

Step 3.  They’ll receive the remaining 5% once the client has paid in full (less a small fee). 

It’s a very straightforward form of business funding and an effective way to bridge the cash flow gap for SMEs. There are also multiple types of facilities to accommodate the specific needs of a business. 

For example, traditional debtor finance is a complete solution where a lender assumes all collections responsibilities. This works well because it frees up time for SMEs so they can focus on core operations and growing their business rather than hunting down outstanding payments. 

There’s confidential invoice discounting, which involves a confidential agreement where a SME’s in-house accounts receivable team still handles credit control. This option is best suited for larger, more sophisticated businesses with a dedicated finance department that don’t wish to disclose to clients that they have a facility in place from a lender.

There’s also selective invoice financing, which is an on demand option where a business secures a line of credit only for the invoices they would like funding against.


A Perfect Solution for Selling to Big Retailers

While debtor finance works well for a lot of different situations, it’s ideal when businesses are selling to big brands. By receiving a line of credit when they submit an invoice to a client, they have fast access to cash flow. 

Rather than waiting for an extended period of time like they would have to with net 30,60 or even 90 day payment terms, they can access up to 95% of the money within a day. That way a business can comfortably fulfill orders, pay their expenses and reinvest in their business.

This can be a real game changer for SMEs who have the opportunity to supply major stores like ALDI, Coles, Woolworths and Bunnings. When they know there’s a framework in place to free up working capital, they can confidently take on these contracts and won’t have to turn down amazing offers because of a lack of funding. 


Capitalising on Key Opportunities 

The success of companies like Hinkler Books and Trendpac proves that forming a partnership with major retailers can be lucrative. And with many of these big brands looking to provide a unique customer experience by diversifying their inventory, there are plenty of opportunities out there. 

The main issue for SMEs is ensuring they have enough working capital to fulfill their orders. Fortunately, debtor finance can be a viable solution that provides small businesses with faster access to working capital, making these partnerships a reality. 

It’s just a matter of choosing the specific type of facility that’s right for them.   

Would you be more likely to form a partnership with a major retailer if you had quicker access to working capital? Please share your thoughts and find out how we can help here, or call us on 1300 332 867

Let us touch base and show how we can help.

Invalid Input
Please use a valid mobile number or landline including area code eg: 0734561234
Invalid Input

Keeping Up with Growth: 8 Cash Flow Management Tip...
Into the Mines: How Businesses Can Grow Along with...

Related Posts


sp awards2019

         Industry Cash flow  Lender
      Award Winners 5 years in a row


Subscribe to receive relevant articles and news to help you manage and grow your business.

Please let us know your name.

Invalid Input

Please let us know your email address.

Invalid Input