Sensing trouble on the horizon in the business credit space, Fifo Capital CEO Wayne Morris is heading a series of product innovations that will support Australia’s private sector to tackle its cash flow conundrums
The interconnected nature of the national and global economy means that a shortage of available, affordable and suitable business finance at one point in the chain soon creates a crunch elsewhere.
It’s a problem the International Chamber of Commerce and World Trade Organization are both acutely aware of. The ICC says trade finance and supply chain finance (SCF) are “essential for the future outlook of global growth”, and a 2018 report by the organisation found that 60% of surveyed banks had or were planning to digitise trade finance operations.
Meanwhile, WTO director general Roberto Azevêdo says the lack of access to SCF is preventing SMEs around the world from leveraging opportunities, making it an issue that “demands our urgent attention”.
In Australia, several solutions have emerged in recent years; however, the concept of trade and supply chain finance remains misunderstood and, as a result, underutilised. Providing invoice finance, SCF and trade finance, as well as traditional business credit, Fifo Capital launched in 2009, and CEO Wayne Morris says the company is on a mission to “rewrite the rules of finance”.
“Our products aren’t debt masquerading as supply chain finance. I’ve seen many other things called supply chain finance, but those products are sheep in wolves’ clothing,” Morris says.
“This would make innovative solutions available for everyone – no segmentation in the market, access to all who want it – using our tech and holistic partnerships” Wayne Morris, CEO, Fifo Capital
Fifo’s solutions provide an SME’s suppliers with a non-recourse payment, allowing customers to extend their services with neither party required to provide security or carry debt. Once on board, the digitised system allows businesses to log in to a cloud-based platform, select the invoice to factor, and 100% of the money is transferred within a few hours.
Having evolved from a simple SME finance solution, Fifo Capital also caters to the needs of corporates and ASX-listed companies, “effectively breaking the barriers on business size and what funding is available to the little guys”.
“When we talk about rewriting the rules of finance, it’s about rewriting them for everybody,” Morris says.
In doing so, Fifo Capital aims to tackle what Morris calls ‘businessism’ – the marketplace prejudice that manifests in many areas of the business world, including finance.
“This would make innovative solutions available for everyone – no segmentation in the market, access to all who want it – using our tech and holistic partnerships,” Morris says.
Getting the word out
The next step is to boost awareness among brokers of both the existence of credit-free finance solutions and the danger of ignoring them. In Australia, credit solutions for businesses are used for everything from equipment purchases to payroll, but as Morris explains, credit isn’t always the best solution for an SME.
In fact, due to the low awareness of debt-free alternatives among brokers and business owners alike, small and medium-sized enterprises are stacking loans to the detriment of their business. Many SMEs use loans to pay bills without ever questioning why they don’t have the working capital to cover basic overheads.
“For brokers, it’s about really understanding the financial make-up of the SME. There are so many loan providers, and you can get loan after loan, but we want to help our brokers to be able to actually solve problems for our clients, rather than simply put a band-aid over them. I think the loan space has some problems on the horizon, and providing loan after loan will cause issues,” Morris says.
“As a broker, simply offering a loan that a business could get for themselves on the internet, with no other innovation, isn’t going cut it in the future,” he adds.
Spot the difference
In recent years, Fifo Capital has introduced two new-to-market alternatives to provide both onand off-balance sheet finance for businesses of all sizes, with secured and unsecured options to reduce risk and maximise choice.
This year, Fifo surveyed its customers and brokers on their perceptions and understanding of those products, an exercise that gains even greater importance in a market where products are SCF by name, but not by nature.
On the customer side, questions focused on market awareness and usability of products to allow Fifo to refine its offering. On the broker side, a series of research workshops investigated how closely the product suite meets expectations, among other areas. The next step in this process will be to conduct similar exercises with brokers who aren’t familiar with Fifo.
“Brokers love the challenge of delivering the impossible and trying to solve the client’s problem. We are demonstrating to the ones we work with that we like doing that as well, so we want to be side by side with them, supporting them,” Morris says.
“Our next 12 months is also about educating and supporting brokers, generating more awareness, and explaining why supply chain, why working capital, why cash flow finance. We will be on that trajectory for the next two or three years.”
However, in terms of the company’s next move, Fifo Capital is aiming far higher than just market education.
“Because of the research we conducted, we can now evidence what we are saying, so next we are going to help wean the market off this thought process of constantly providing loan after loan,” Morris explains.
“Businesses are also getting tired of taking out loan after loan after loan. They want solutions to a bigger problem, and that bigger problem is working capital or cash flow.”
In preparation for what lies ahead, Fifo Capital has already boosted its support team and is next looking to increase the amount its business clients can leverage through its solutions.
Among the innovations Fifo Capital has planned is a solution that keeps a client’s use of financiers confidential. On the rest, Morris is tight-lipped, but he does hint that “innovation is coming”.
“Supply chain is great, but what we have coming up is even better,” he says.