Technology has changed a lot of things about business in the last two decades.
It’s probably changed some of the ways you market your business – with websites, online articles, social media and pay-per-click advertising replacing newspaper ads and the annual Yellow Pages ad.
In recent years, technology has changed how your business website actually works – making it responsive to different devices – from old-fashioned desktop PCs to smartphones and tablets.
The existence of better technology has enabled multiple tiers of service providers – so you can work with an independent communications retailer like Aussie Broadband rather than a brontosaurus like Telstra.
Technology has likely also changed the way you run your business – with Zoom calls, Cloud-based accounting and smartphone apps.
Technology has ALSO upgraded business finance
In the same way – though it’s not so obvious on a daily basis – technology has enabled a whole new range of business finance capabilities.
So today more SMEs than ever before have access to responsive business finance – with better, more flexible products and services that respond to your business needs.
Responsive finance means your business can respond better to challenges and opportunities.
Technology has enabled new, smarter financial products and services
With today’s new financial products so you can run your business better. For example:
- You can now offer your business customers the same “buy now / pay later” options as consumer finance does.
- If you have a great idea that your market wants but traditional sources won’t fund, you can potentially crowdfund it.
- If you want to take your business, solar but you don’t want big upfront bills, you can finance a commercial Power Purchase Agreement (which acts like a novated lease for your company car).
Technology has streamlined and substantially improved traditional finance options:
- Making more flexible, business-friendly tools
- Enabling new, more flexible players to enter the finance marketplace.
The days of “I’ll have to put it on my credit card because the bank said NO” are history.
How Debtor Finance has improved
Debtor finance (sometimes called Invoice Finance) is one example of a product that’s been radically updated. It’s had a bad reputation in the past – but today’s tools are vastly improved.
Debtor finance is a tool that lets you borrow against what your customers have contracted to pay you in the future – so you can use most of those funds today.
It used to be really difficult to organise, and could sometimes disrupt your relationship with your customers. So where the wrong product was implemented, or it wasn’t set up well, it had some seriously bad results.
But not anymore. Today’s leading debtor finance products, correctly implemented:
- Can be invisible to your customers – because you don’t have to visibly hand over customer invoices and payments to a third party finance company.
- Can be obtained from a variety of affordable sources – with a fair bit more flexibility than the big banks.
- Can be integrated with your online accounting software, so as soon as you make a new sale, you can borrow funds based on that sale without an ongoing authorisation process.
How Trade Finance has improved
Trade Finance enables your supplier to be paid for what you purchase by a third party financier. That third party gives you extended payment terms, so that your cash flow is not tied up for months while you wait to be paid by your customers.
Trade finance used to be for big importers with long lead times on physical deliveries – and it used to come with bags of paperwork – but not any more. Today, trade finance can be used for local purchases – and technology has radically streamlined the paperwork and processing.
How Asset Finance options are increasing
It’s been traditional for a business to buy and own the equipment they need to operate. While most business people are familiar with using a Novated Lease for a new company car, they’re not across the full spectrum of asset finance options.
These options mean that you can limit the capital impact of purchasing new equipment on your operations, and reduce the business risk of operating using obsolete equipment – it can cover anything from PCs to EVs.
For example, today commercial premises can use a Power Purchase Agreement to put in solar/battery systems – lowering their energy costs without spending precious capital or waiting years for depreciation deductions.
There’s a growing list of options, but the key asset finance options are:
- Commercial Hire Purchases
- Financial and Operating Leases
- Chattel Mortgages
- Novated Leases
- Technology Rentals
Working Capital Finance improvements
Your working capital is your short term current assets less your short term current liabilities. It’s how much money you have to spend in a given period.
Whether purchasing extra stock or inventory, fitting out offices or retail outlets, opening a new office, expanding an existing division or setting up a new one, you are going to require working capital. Without adequate working capital, you simply cannot grow.
No business can operate effectively on just its available working capital. It might be the super-expensive credit provided by the owner’s credit card, or delaying payment to suppliers – but there’s a “finance cost” somewhere (in trust, if not in $$$).
The main types of Working Capital Finance are:
- Lines of credit
- Unsecured business loans
- Secured business loans (typically through banks)
Technology developments and an increased range of financial service providers means that there is ALWAYS a better option than a personal credit card.
We’re entering a world of Responsive Finance
Responsive Finance is about combining the right finance products into a powerful Working Capital Strategy – a strategy that enables your business to respond to the ebbs and flows of your industry cycles.
If your Working Capital Strategy is a credit card, you’re paying a super-high price to continue operating. It’s like trying to surf on your kid’s styrofoam boogie board. You may keep your head above water while being pushed along by a wave – but you don’t have much ability to navigate to where you want to go, and leverage shifts in the world around you.
Today, the right, strategically planned Responsive Finance is a tool to help you build the momentum in your business and accelerate your progress towards your goals – whether that’s long term growth or an early retirement.
Taking advantage of the latest Responsive Finance solutions is like moving from a manual Ford Fairlane to the latest Tesla. It enables you to do a whole lot more with less effort – whatever your goals are.
It’s still Buyer Beware, though
There are some VERY ordinary finance products out there – along with single-solution vendors who are far more interested in their sales than your strategy.
And there are some great finance tools that have been “sold” to totally inappropriate businesses.
Working Capital Strategy is a technical area that requires deep business experience as well as financial know-how. So make sure you get quality advice from a trusted advisor with years of experience and a range of options to offer.
A good rule of thumb is to compare:
- The amount of time spent asking questions about your business, your plans, your resources and your long-term goals.
- The amount of time spent “telling” you about the product, how it works and how excellent it is.
If you’re getting reams of “information” about the excellence of the product and minimum interest in your business operations – then back away.
The right financial tools and cash flow strategies will increase the ability of your business to respond to both unforeseen disruptions and normal cycles. Advice from a trusted expert who understands your business will be fundamental to navigating today’s multiple challenges.
If you want your business to thrive and grow, then talk to our Working Capital Strategist, Martin Cattach, today.
+61 407 477 555
Discussion on working capital and funding options: