25/03/2008 - 14:04

Debtor finance drops off in WA

25/03/2008 - 14:04

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The use of debtor finance by Western Australian businesses recorded a rare drop in the December quarter to $1.3billion following five years of strong growth, the Institute for Factors and Discounters (IFD) of Australia and New Zealand has reported.

Debtor finance drops off in WA

The use of debtor finance by Western Australian businesses recorded a rare drop in the December quarter to $1.3billion following five years of strong growth, the Institute for Factors and Discounters (IFD) of Australia and New Zealand has reported.

The report was compiled using the IFD Debtor Finance Index as a quarterly measurement of total factoring and discounting turnover in the industry.

 

The full annoucement is pasted below:


Western Australian businesses witnessed a drop in their funding against their trade debt for the last quarter of 2007 racking up $1.3 billion in debtor finance loans, a 9% drop on the figure for the September quarter.

However the state's businesses have seen the biggest national growth over five years in access to debtor finance, 307% from $1.3 billion in 2002 to $5 billion last year.

According to the Debtor Finance Index released today by the Institute for Factors and Discounters (IFD), WA businesses accounted for 8% of the record $15.7 billion advanced by the factoring and discounting industry to Australian businesses in the last quarter of 2007. Victoria at 34% of the Index and NSW/ACT at 33% of the Index were the biggest users of debtor finance for the quarter.

Peter Fitzpatrick, chairman of the IFD said "Businesses in WA have witnessed a massive 230% increase in access to debtor finance over five years from $1.3 billion in 2002 to $5 billion last year."

Mr Fitzpatrick counts among the reasons for this growth:

- The growing popularity among SMEs and medium to large corporations in using outstanding debts as a means of funding business development

- The spread of the debtor finance client base beyond SMEs to medium-sized, private companies and smaller listed companies with annual turnovers of up to $500 million and more

- The entry of all the major regional and international banks in providing debtor finance.

Mr Fitzpatrick said, "WA businesses will continue to experience tightening lending conditions and as a result will be forced to find alternative sources of funding to sustain growth through 2008 and beyond. For this reason we expect the growth in debtor finance to continue apace."

The Debtor Finance Index indicates that 5921 Australian businesses are now using debtor finance to fund their business growth - 664 more than a year ago. Of those the biggest users of this type of finance in the last quarter were the wholesale trade (39%) and the manufacturing industries (21%).

"Whereas a decade ago, debtor financing was a niche product offered by specialist nonbank providers, today it has grown into a mainstream funding alternative provided by a broad spectrum of banks in addition to the specialist financial institutions.

"There has been a tenfold growth in the discounting and factoring industry across Australia and New Zealand over the last 10 years with debtor finance provided to businesses moving from $5 billion per annum in 1997 to a $55 billion last year," says Fitzpatrick.

Other highlights from the December quarter include:

- A significant jump in debtor financing by Tasmanian businesses from $45.5 million in the September quarter to $56.5 million in the December quarter.

- Northern Territory and South Australian debtor finance topping the $1 billion mark for the first time ever.

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