Small business is actually big business.

As at June 2014 in Western Australia, there were 218,798 businesses with 211,658 of these considered small (0-19 employees) and small business making up 96.73% of all WA businesses.

According to the Small Business Development Corporation (SBDC) the top five small business industries are –CFD-blog-23-pic

– Construction (40,080)

– Professional, scientific and technical services (25,708)

– Rental, hiring and real estate services (23,181)

– Financial and insurance services (18,591)

– Agriculture, forestry and fishing (17,818)

Many of the industries mentioned above including construction and agriculture have longer payment cycles with their customers tying up funds and making it harder to have a consistent cash flow.  Without a consistent cash flow it is also harder to grow the business.

Factoring or debtor finance can provide cash flow consistency to provide stability and the desired growth.

Cash Flow

Factoring not only provides cash flow against your current unpaid invoices but the Factor will follow up on the required payment and timely collection.  They are not however, a debt collector.

Another advantage is working with a Factor is the due diligence they will do on your debtors, as this is what will determine whether they work with you or not.  The homework they do can tell you a great deal about your customer.

Factoring is a legitimate form of financing, it should not be considered a “last ditch” option but an option of choice.  A smart choice.

Small business in particular does not have the same finance options as large businesses which have more collateral, usually assets and a longer financial history, all issues which banks take into consideration when considering lending.  So other options need to be used or no financing at all.

Recent figures in Australia have shown that debtor finance is assisting the SMB sector to stay afloat.  It is also being used strategically to grow the business either employing more staff, increasing capital expenditure or even acquisitions.  Wholesale and manufacturing are two of the biggest users.


This type of finance is tied into the sales a business makes and the amount of funding accessible will grow as sales activity increases, so it is flexible around the ebb and flow of a business.  Quite different to a set loan or overdraft which is generally fixed at the outset and not so easy to amend during the loan period.

While invoices need to be over a certain amount and usually turn-over per month needs to be at a certain level, factoring can provide immediate benefits and more certainty and with more confidence in your business, you can offer attractive terms to your customers.

In a competitive economic climate where lenders are understandably more cautious but business needs to find effective ways to diversify and grow factoring is a logical avenue for many to pursue.