Financing that's fit-for-purpose

To achieve growth and operational objectives, businesses recognise they need the liquidity to call on. As such, many are seeking flexible access to working capital and options to fund equipment that better matches their cash flow cycles.

New research shows that when financing equipment and vehicles, almost two in three businesses (63%) believe adjusting repayment cycles would aid their cash flow. The remainder agreed that variable repayments would help.2

More specifically, the top-rated areas of support are options for a payment-free period when equipment is first delivered, repayments set to seasonal cash flows and lower initial repayments that step up over time.2

Chris Moldrich, General Manager of Asset Finance at CommBank, says that the research reflects the rising demand among customers for equipment financing that is structured according to individual business needs.

"No two businesses are the same, so it's no surprise that businesses want equipment lending options that are fit for purpose," Moldrich says.

"In an environment where cyclical and seasonal factors are impacting cash flows, businesses need the ability to set their repayments to move in line with these factors or choose the right frequency like monthly or quarterly accordingly."

Moldrich adds that when evaluating equipment financing loans, certain features relating to fees and repayments can optimise cash flows. This includes:

  • The ability to select the amount, repayment frequency, and total duration of the loan upfront
  • Options to vary the ongoing repayment amounts through end-of-term lump sum repayments
  • Customised documentation fees depending on the loan agreement type
  • Not having to provide extra security against the loan

Better aligning cash in with cash out

The demand for general business and working capital financing support further underscores the convergence of cash constraints and growth plans facing businesses. Across all business sizes, just over 48% would consider lines of credit they can draw down on as needed. This climbed to 63% among larger businesses while less prevalent among SMEs.2

Many businesses also indicated that unpaid invoices are a working capital handbrake, with over 41% saying they would consider financing that freed up cash from receivables. This was as high as almost 63% among micro businesses.

The businesses most supportive of using outstanding invoices as security to access working capital were also concentrated in certain industries. This included wholesaling, manufacturing and those relating to transport and logistics.

Another industry that sees the benefit is labour hire due to the often heavy fluctuations in cash flows. The CEO of labour hire business Impact Services, Kerry Fry, offered reasons why this option is so compelling.

"Cash flow timing risk is a big issue for a business like ours," Fry says. "We work with many large organisations, and while we pay our employees weekly, we may not receive payments until six to eight weeks later."

To manage this risk, Impact Services uses CommBank's Stream Working Capital solution, which unlocks the value of select invoices to provide the organisation with the working capital it needs to meet ongoing expenses.

Fry says that "The Stream Working Capital online platform makes it easy to nominate clients within your debtor book to secure against," adding that it links with Impact Services' accounting software, providing a single and timely view.

Elizabeth Huxley, General Manager of Working Capital at CommBank, says businesses now expect flexible and fast financing options to speed up cash conversion.

"Customers often have latent liquidity sitting on their balance sheet. Unpaid invoices are a classic example, where we hear some businesses are waiting longer to get paid without any change to when operating expenses are due.

"We created Stream Working Capital to address this challenge. We provide a simple digital platform for businesses to select the invoices they borrow against and see their facility limit that's always up-to-date given Stream integrates with Xero, MYOB or Quickbooks."