Setting up your own business can be an extremely rewarding career choice. After all, you get to be your own boss and make money off your passion. However, this move can also come with a high-risk factor.
According to data from the Australian Bureau of Statistics, almost two thirds of start-up businesses in the country fail in the first three years of operation. Further analysis found that the biggest contributor to this failure is cash flow shortage.
Culture of Late Payment
The finding above does not exactly come as a surprise, considering Australia has a rather established late payment culture—one that Small Business Ombudsman Kate Carnell said “has become so critical”.
When clients are slow to pay their invoices, it creates a cash flow shortage that can eventually halt a company’s day-to-day operations. This is especially true if a business is relying heavily on one large client or is hit by an event that it is not properly insured against.
If slow payments drag on for months, an otherwise profitable company might end up closing for good.
The Problem with Business Loans
When dealing with a cash flow shortage, most companies turn to banks with the hope of obtaining a business loan. Although this might provide the necessary funds to jumpstart operations again, it’s merely a short-term solution.
It can even lead to more financial problems in the future since now your company needs to make monthly repayments and banks tend to be unforgiving creditors.
Some companies might be tempted by business loans that are available online. But these pose more issues as they are typically unsecured and come with very high interest rates.
Choosing Debtor Financing
Fortunately, there is a far better alternative for a business owner caught in a pickle—debtor financing. This is a type of funding where a company can sidestep late payers and use their accounts receivables to raise money upfront.
This way, you can readily access the cash that’s supposed to be flowing through your company. This will also protect you from any unpleasant surprises and allow you to reap the benefits of your hard work without having to wait an age for clients to pay your invoices.
Slater Byrne Recoveries are partners with Debtor Finance Broker, a firm that’s connected to a wide range of debtor finance providers in Australia.
With their help, you can find the best debt financing solution for your needs. Contact us today at 1300 794 290 for a quick referral.
Liam White joined the Slater Byrne Recoveries team in early 2013. He has worked across the credit & dispute resolution industry for a number of years. He is currently working in a Marketing/Head of Sales capacity at Slater Byrne Recoveries.