Business owners are no longer risking their personal assets to fund business growth as they ride out the effects of the global financial crisis (GFC). Debtor finance specialist, Oxford Funding observed that business owners are more concerned about risk exposure and are choosing funding strategies such as debtor finance that separates personal wealth and enterprise development.
The GFC was a financial wake up call for businesses. In Australia, where debtors rarely settle their debts within the standard 30 days payment period, cash flow pressures can be especially acute as Rob Lamers, CEO of Oxford Funding explains: “The GFC saw many business owners left financially exposed as payment terms blew out and a record number of debtors defaulting on what they owe due to insolvency. “As a result what we are now seeing are business owners preferring not to put their personal wealth on the line to fund business growth. Instead many are seeking alternative funding arrangements, such as debtor finance, which doesn’t require personal assets for security, allowing business owners to separate their personal assets from the business.”
Brisbane-based Transport Solutions is one company who opted for debtor finance to help smooth out their cash flow, rather than putting their home on the line to fund business growth.
After the GFC hit and one customer who owed Transport Solutions $70,000 went broke the company approached Bendigo and Adelaide Bank, initially to request an overdraft that would allow the company to fund its mandatory outgoings, but was recommended Oxford Funding’s debtor financing as an alternative funding solution. “At the outset, I was sceptical and a little nervous about debtor financing,” Larcombe admits. “But it’s flexibility and the fact that we didn’t have to put-up personal assets as security, made it the most attractive option.
As a small operator in the transport sector still riding out the effects of the financial crisis Larcombe admits that their business would struggle without debtor finance. “It provides us with the security we need to grow with confidence and is now an important part of our long-term financing strategy.”
