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How Australian small businesses are seeking alternatives to fund growth

A record number of Australian small businesses are ditching traditional bank loans to fund growth and generate cash flow.

“Around 75% of businesses who come to us looking for invoice financing need the extra cash flow because they’re in a period of high growth,” says Angus Sedgwick, CEO of Optipay.

“Traditionally business owners were limited with their options for business finance and a bank loan was the go-to solution but Australian SME owners are wiser in 2022 and they’re realising there are other options,” adds Mr Sedgwick.

A recent report from Judo Bank* found nearly half of Australian SME’s are seeking to grow their business, but one in four have been turned away from accessing new funding.

The report also found banks are taking on average 42 days to discharge loans when an SME switches lenders, inhibiting quick access to funds.


“The problem some businesses run into with a bank loan is that they’re growing so rapidly over a 6 month period that suddenly the approved loan isn’t enough and it can be virtually impossible to get that loan increased,” says Mr Sedgwick.

The demand for invoice financing has more than doubled since early 2018 with 16.3% of SME’s taking out a new invoice finance facility in the past 12 months compared to 7.6% three years ago.

“When a business is going through a rapid growth phase it needs cash as they might be taking on new contracts, new employees, upscaling machinery and possibly needing new premises so they’re spending money before they make any – and invoice financing can bridge that gap.”

“Invoice finance is an advance on the money owed from a business’ outstanding invoices like a revolving line of credit – effectively unlocking the cash tied up in the accounts receivable ledger.

“An invoice finance company will pay up to 90% of the verified outstanding invoice value, often within 24 hours. It effectively bridges the cash flow gap between a sale being made and cash for that sale actually being received.”

It allows financial controllers to be very accurate with their cash flow and budgeting because if they have invoice financing, they know when they hit their forecast sales they can get at upto 90% of that in cash immediately, allowing them to plan for expenditure, input and purchasing for future sales.”

Optipay (former TIM Finance) has seen a two-fold increase in businesses enquiring about invoice financing compared to the same time last year with most of the interest coming from the manufacturing and wholesale trade industries.


“The best type of business for us to take on is a growing one. They’re running efficiently, they’ve got good cash flow and they’re making strong sales.”

“Unlike a bank, we don’t look at your historical financial performance and are not focussed on your debt to equity ratio and serviceability, we instead look at what your current sales are.”

*SME Banking Insight Mid Year Report 2021


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