An increasing number of SMEs are turning to debtor finance to solve their cash flow woes in the downturn, new data has revealed.
The tough economic conditions plus an increasing rate of businesses defaulting on payment terms is fuelling a rise in the number of debts sold to banks and financial institutions, according to the latest data from the Institute for Factors and Discounters.
The data revealed debtor finance turnover for the June quarter 2009 reached $15.6 billion, up on March quarter’s figures of $14.9 million; while turnover in the debtor finance industry has climbed 58 percent over the past three years.
Commenting on the figures, Rob Lamers, CEO of debtor finance firm, Oxford Funding said many small businesses were not adequately prepared for the economic slowdown.
“Many small businesses were ill prepared for the economic slowdown, and as a result were caught out when defaulting debtors and drawn out payment terms put the squeeze on cash flow prompting many to look to other financing methods, such as debtor finance, to support their cash flow requirements,” he said.
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