A Big Deal: Martin Mulder

by AB22 Nov 2019

Martin Mulder, business adviser at VHM Finance Partners, explains how he identified invoice finance as the solution for a construction company refused further credit by its incumbent bank


The commercial construction company in question lacked the required capital to fund its ambitious growth plans, but management wanted to capitalise on opportunities in the buoyant NSW construction market and grow revenue by 30% over the next 18 months.

However, the company was seeking finance at a time when the property market was contracting.

That contraction began in early 2018 but accelerated in July of that year. The business owners first went to their bank to request another $1.5m in working capital, but they were rejected due to their financial and security position. The bank didn’t believe they could service the loan at the time.

Bank policy meant funding decisions were also based on property market forecasts. The bank said its decision had to be based on conservative valuations of property security. It therefore valued the owner’s residential property at approximately 20% less than what an independent valuer had estimated previously.

The company then came to me in a second attempt to secure bank funding. I suggested looking at other assets within the business, and subsequently identified accounts receivable as a possibility.

While the incumbent bank had security on that asset, it wasn’t providing funding based on it. The company had $2.5m worth of outstanding debt that it could potentially obtain finance against. 


I approached Australian Invoice Finance (AIF) in November 2018 to determine whether it could provide finance against the company’s debtors. Given the business was unable to secure further credit with its primary lender, it was looking for a financier with a flexible mindset regarding finance for small businesses.

AIF analysed the company’s financial position and reviewed the balance sheet, profit and loss statement, positions of debtors and creditors, and the tax statement. It met with the company directors to gain a broader understanding of the corporate structure of the business and its related entities.

AIF quickly determined that it could provide funding against 85% of the outstanding invoices, giving the business a letter of offer detailing the terms and conditions under which the finance would be provided, including pricing.

Given that the business was unable to secure further credit with its primary lender, it was looking for a financier with a flexible mindset

The terms included a disclosed facility, funding within 24 hours of invoice, daily retention payments, a 12-month term, and a simple, effective security structure. AIF also assigned a client manager to service the facility and help the client extract the full benefit from the facility.

The company’s management team questioned some of the terms and conditions, with each concern then reviewed by AIF, leading to an amended offer document that better reflected the cash flow needs of the business.

At that point, the company accepted the final letter of offer. 

Prior to transferring funds to the client, AIF negotiated with the company’s existing credit provider, which held security, to determine how much money was available under the ledger. That way, the client could accurately allocate funding to the appropriate creditors, whether secured or unsecured, and ensure that all outstanding expenses were covered.


AIF now funds the company on an ongoing basis. Being in a much stronger cash flow position, the client submits invoices once or twice a week and draws down money in a controlled manner in order to pay its creditors.

The improved cash flow has taken the business from a 60-day debt term to 15–20 days, multiplying cash flow three to four times. 

It also immediately enabled the company to retain existing staff and more efficiently cover wages during the traditionally slow period over Christmas and New Year.

Following a SWOT analysis, the company determined that its improved cash flow position would enable it to buy larger quantities of stock at better prices. Now, with invoice finance funding the business, the slow-paying debtors are not an issue as the new finance supports the purchase of stock on a regular basis on better terms, including larger creditor discounts.

More stable cash flow has also enabled greater reliability around business planning and allowed for a higher degree of certainty when launching and financing new projects.


Martin Mulder
Business adviser at VHM Finance Partners