Re-writing the rules of finance

by AB19 Sep 2018

Fifo Capital CEO Wayne Morris, explains how the business finance specialist has pioneered a first-of-its-kind, debt-free solution

On the surface, Australian businesses have no shortage of funding options for their ventures, but they still face a number of barriers when looking to boost cash flow, capital and lines of credit.

Traditionally, the go-to solution is to take on debt. However, while a slick advertising campaign can promise the world, the reality is a barrage of hidden costs and additional requirements that business owners aren’t always aware of.

Tackling the issue head-on, Fifo Capital has introduced two new-to-market alternatives over the last 12 months: supply chain finance and trade finance. The company provides on- and off-balance-sheet finance for businesses of all sizes, with secured and unsecured options to reduce risk and maximise choice.

Supply chain finance helps businesses receive payment on invoices earlier, easier and on more attractive terms, buoying the SME sector in particular and helping to strengthen the economy through greater liquidity in the marketplace.

This is finance without the debt: suppliers are paid on time while customers work on their own terms, which allows businesses to retain cash within the enterprise.

It’s the first Australian supply chain finance solution that is tech-driven and debt-free, and was developed in response to the cash flow trends witnessed by Fifo Capital. “In Australia, we see businesses struggling to get paid on the terms they need, and they are turning to debt solutions to support themselves,” CEO Wayne Morris explains.

While new to Australia, the approach is well established in other markets, including the UK, where Morris was based before joining the Australian office in 2017.

“I realised by looking at the market that, if we could bring this product to Australia, we could really change the way businesses here pay and get paid, and we could do that in a positive way, without the need for debt,” says Morris.

“We looked to do that differently from our competition. Rather than factoring every invoice, we were one of the first to pioneer selective invoice financing, where our clients can pick and choose which invoices they want paid early to help their cash flow.”

Supply chain finance gives suppliers a non-recourse payment and allows customers to extend their services, with neither party required to provide security or carry debt. Once on board, businesses log on to a cloud-based platform, select the invoice to factor and then receive 100% of the money within a few hours.

“What we’re aiming to do is completely rewrite finance in Australia in a way that is engaging and supportive for all parties” - Wayne Morris, CEO, Fifo Capital

“It’s a completely new way from how traditional supply chain finance and trade finance works, because we don’t lend any money to the smaller businesses that want to be paid on time or early; we just simply pay what they are expecting. It’s a complete innovation,” Morris says.

Dovetailing this, Fifo Capital’s trade finance solution can be leveraged to pay overseas suppliers as though they are in Australia, with no complicated paperwork and no need for letters of credit. Suppliers can be paid before the goods leave their country and clients can choose when to pay Fifo Capital.

The facilities are available to all enterprises with an ABN that sell products or services on credit terms to other Australian businesses.

While the products set a new standard in the market, the true USP is that businesses are not required to provide security – an added benefit directly inspired by Morris’s experience in the UK.

“The UK very much operates like Australia, whereby a business typically needs to give some form of security to a lender, and that might be over the business’s assets, the director, or, worst of all, over the director’s personal home. But why?” Morris says. “The business delivers the goods to a customer, gives them credit terms, but just wants to be paid. They shouldn’t need to then guarantee their customers in case they don’t pay because they are using finance to give credit to the customer. We say that’s fundamentally wrong.”

The facilities have provided viable solutions for more than 3,000 client businesses to date, and this year Fifo Capital acquired its first ASX-listed client, demonstrating how enterprises of all sizes can benefit from a liquidity boost.

“What we’re aiming to do is completely rewrite finance in Australia in a way that is engaging and supportive for all parties. We see companies large and small relying on their suppliers, and those suppliers are the engine room of the country. If they stall, the supply chains stall, and ultimately so does the country,” Morris says.

Fintech with a face

While the efficiencies created by technology provide a footing in the fintech space, this is complemented by a hands-on approach to creating what Morris describes as “fintech with a face”.

Fifo Capital has been active in Australia and New Zealand for the last decade, scaling up to establish a nationwide network of 50 offices, all working to service businesses with a one-to-one approach, whether via phone or face-face meetings.

“We’re a different business to just 12 months ago, building on our strength of having financial experts throughout Australia, providing corporate and small business funding, developing innovation and revolutionary fintech – we’ve remodelled finance to make it easy and accessible for all businesses,” Morris explains.

Brokers form a critical element of the network and, according to Morris, are supported through a “close and collaborative approach”.

Training is conducted face-to-face and online – webinars were introduced in February of this year – and further programs are currently under development. A broker accreditation program forges deeper understanding of the solutions Fifo Capital provides and empowers brokers to leverage their knowledge and create hybrid solutions for their clients.

On the marketing front, bespoke co-branded materials are also available for brokers, including web content and client literature.

Finally, the broker network is a critical link in generating client feedback, providing a direct line of communication between Fifo Capital and its clients, with a goal of continually improving the products and services offered.

“We don’t just sit with our hands held out waiting for the brokers to bring us deals. We try to proactively work with them to find the right solution for their clients, and fine-tune our products to fit different circumstances,” Morris says.

Brokers also provide a critical link in educating clients – the majority of whom are unaware that credit-free financing is an option for boosting cash flow.

With that message now edging into the corporate space, plans for the coming two years focus on further integrating solutions with technology to drive greater efficiency for business owners and financial controllers. Further innovations are also on the cards, as well as the development of additional education tools to support the changing approach to debt and finance.

“We’ve invested heavily in developing the customer service and support side of our business with our clients, and now we’re well and truly set to move to the next level by capitalising on our systems and processes, and all our evidence points to now being a good time to grow,” says Morris. ]

“What we’ve seen to date is that the evolution of some of our products shows there is more demand than ever for what we have to offer. So we’re extremely excited by this.”