Invoice Financing

For businesses, in particular small businesses, cash is king! Cash flow remains a dominant stressor for small business owners where 79% of them are kept awake at night for this reason and furthermore impacts the revenue of nine out of ten SMEs. 92% of SMEs have also said they would have generated more revenue over the past 12 months if their cash flow situation was improved. Late payment accounted for 43% of cash flow downturn. 37% of small businesses operating in competitive environments who have faced a revenue decline in the past 12 months greatly feel the effects of late payment on their ability to maintain operations. Just under half of businesses in this category indicated that cash flow had suffered due to late payments.

Average payment times for Australian firms is 53 days after the invoice is submitted, but it can extend to as long as 90 days. At times, the small business owner has had $500,000 of payment outstanding, which can be difficult to manage when payments are extended to 90 days. In these cases, the small business has to fund shortfalls out of its own pocket. Late payments have also been a contributing factor to the reduction of staff working hours. The small business believes that a termination for convenience clause is included in contracts with big businesses, so they can just get rid of small businesses for any reason. This makes it difficult for small businesses to chase late payments for fear of losing the contract.

Average Payment Times of Invoices

In the event of cashflow issues, businesses turn to loans as a means of helping them to stay afloat. However, the risk of business lending has increased greatly since the GFC which makes it more difficult to obtain financing or at a much higher interest rate compared to the other loans as shown in the interest rates spread chart below.

Interest Rate Spreads on Business Debt

Luca+ provides an alternative for businesses to get funding when invoices are paid late - by allowing a third party to finance the invoice in advance for a fee, also known as invoice financing. Unlike other invoice financing companies already in market, Luca+ is able to calculate the credit risk of the invoice based on the past performance and therefore correctly allocate the right amount of fee for the financier based on the risk taken. Furthermore, given that invoices are stored on Ledgerium Blockchain, we are able to tokenise the invoice for financing allowing financiers to distribute their funds depending on their risk profile.

Luca+ or Block Ledger does not provide financing for these invoices. We only provide the platform that allows third-party lenders to view, analyse and provide financing as per the local laws.

source: https://www.asbfeo.gov.au/sites/default/files/documents/ASBFEO-payment-times-report-2019.pdf

https://www.smartcompany.com.au/finance/cashflow/australian-businesses-paying-bills-faster-ever/