Brokers have been urged to latch on to debtor finance as small businesses face tough times meeting cash flow needs in the year ahead.
The Bibby Barometer Index, measuring small business expectations, has found that 22% of SMEs said their survival was threatened in the last 12 months by a lack of access to cash flow, and small business expectations of the economic environment have decreased by 6%.
Bibby Financial Services national sales manager has told Australian Broker that the results portend a jump for debtor finance, as many SMEs eschew traditional bank lending.
“Banks do require too much security, and we’ve been aware of that for a long time. The factoring industry is growing and maturing, and it’s something we’re trying to encourage the broker channel to grow with given the opportunities present to diversify their revenue base,” Green said.
Green said brokers have traditionally been unfamiliar with the debtor finance market, and had failed to take advantage of the additional revenue it could present. However, he indicated that this was slowly changing as the third party channel matured.
“Things are improving gradually. Firms like Bibby are very broker-friendly and broker focused, but it is a bit of a slow burn as the channel matures and the debtor finance product penetration increases. Half of our new opportunities are sourced through the broker channel,” he said.
Green claimed the sector presented increased opportunities for brokers, with more SMEs looking to access debtor finance. Bibby research suggested that 64% of businesses with $1m or more in turnover believe bank lending requires too much security, and while Green conceded few brokers are debtor finance specialists, he argued that brokers should look to add the products to their repertoire to increase the opportunity for revenue diversification.
“It is a niche product. Debtor finance certainly doesn’t have the scale of traditional bank lending products, but it’s all about strengthening their relationship with the client base. Debtor finance is another tool in their toolkit,” he said.
Brokers failing in debtor diversification
Stressed SMEs give boost to debtor finance