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News & Media

Tight credit market sees debtor finance growth

Businesses seek secure cash flow, debt collection help

Melbourne, 6 December 2011 - As securing business loans continues to be a challenge in the tight credit market, more Australian businesses are turning to debtor finance for cash flow funding, according to the latest figures released by the Institute for Factors and Discounters of Australian and New Zealand (IFD).

The IFD's figures for the September 2011 quarter put debtor finance turnover at $15.6 billion, up 3% from the June 2011 quarter, and an increase of 4% on the September 2010 quarter.

Of the total turnover for the September 2011 quarter, invoice discounting comprised $14.4 billion and factoring represented $1.2 billion, a rise of 24% compared with the previous quarter, the largest increase in factoring turnover recorded to date.

Invoice discounting involves the financier purchasing a business's trade debts, which acts as an advance until the business’s debtors pay their invoices. Factoring is similar but also includes the financier providing a debtor administration function; debtors are aware of the financier's involvement and payments must be made to the financier to clear the debt.

"The rise in factoring client numbers and turnover is particularly interesting because it shows the increasing acceptance of factoring as it’s evolved into a more sophisticated cash flow tool," said Lamers.

“With our ability to tailor both our factoring and invoice discounting solutions around businesses’ requirements, Oxford is able to cater to a broad market seeking specialist cash flow funding,” says Lamers.

“This explains why our 14% growth in total turnover in the three months to September is ahead of the industry average.”

Lamers believes more businesses may be using factoring because having a third party involved encourages debtors to pay on time. "There's no doubt that the visibility of a financier makes debtors more aware of their payment obligations. It also indicates that specialist providers like Oxford Funding have an important role to play in supporting debtor administration and collection calls."