It’s clear that the Australian economy is facing unprecedented uncertainty. Small and medium-sized enterprises (SMEs) are struggling to access the finance they need to grow and develop. And let’s be honest, relying on debt-based loans to keep businesses afloat is like trying to build a skyscraper on quicksand.

To ensure a brighter future for Australian businesses, we need to radically overhaul the business finance landscape. We need to move away from outdated thinking and embrace more flexible and innovative financial solutions that cater to the specific needs and abilities of SMEs.

As Wayne Morris, CEO of Fifo Capital, emphasises in this article, it’s time to take action on dated notions around supply chain finance and working capital solutions. It’s time to redefine business finance in Australia.

We need collaboration between the government and financial institutions to create a more inclusive and effective finance system that better serves the needs of businesses and the wider economy. It’s time to break free from the chains of debt-based loans and build a more sustainable, thriving business finance landscape.

Why it’s time to rethink business finance in Australia

Remember Sir Joh Bjelke-Petersen’s argument against daylight savings?

The curtains will fade and the cows won’t know when to be milked.

Crazy. Right?

Yet, somehow, to this day, daylight savings is not observed in Queensland, the Northern Territory and Western Australia.

What’s the point I’m making? Despite all logic, all commercial thinking, and despite many thinking it’s the equivalent of living in the dark ages, somehow it’s still the reality.

It’s the same with debt-based business loans.

Despite overwhelming evidence that traditional business loans cause massive issues for SME businesses.
We can’t seem to crack our obsession with them.

It’s time Australian businesses rethink business finance and start using better, more powerful finance solutions that will improve their footing over time.

And at the end of the day it is the SME businesses that are the ones really being let down by these backward notions.

The need for a new approach to finance

Australian SMEs have been hit hard by the economic downturn, which looks like it will continue to play out in 2023 and beyond as we shift into a recession.

Corporate giants and multinationals will no doubt be able to weather the coming recession and largely retain their market share — while SMEs have been left struggling to stay afloat.

It’s simply not a fair system. The decks are stacked against SMEs.

But if SMEs embraced more advanced forms of finances, as the larger entities do, then they too would benefit from the advantage and powerful protections that come in hand with these forms of finance.

Changing times and dated notions

In the last year, we’ve seen many more SMEs have taken the step to look for alternative sources of capital, such as supply chain finance and working capital solutions.

Often this was driven by a need to survive, rather than a choice. But what we’ve found is that once the SMEs business owners are introduced to working capital solutions, they are overwhelmingly shocked by how powerful this can be for their business.

Rethinking the go-to: Supply chain finance and working capital solutions

The traditional banking system is not always the best option for SMEs looking to secure finance. And we need to stop thinking of it as the starting point.

What we need to start with, is what the business is looking to achieve. And then from there you can work out what is the best solution given the amount required, timing, additional benefits that could be accessed and more.

Better alternatives to debt-based loans

Working capital solutions provide SMEs with fast access to funds and flexible terms, allowing them to better manage their cash flow and accelerate their growth.

In addition, supply chain finance and working capital solutions can help SMEs to reduce their costs and improve their competitive advantage. By providing working capital solutions that out-perform traditional forms of finance, SMEs can free up funds to reinvest in their businesses.

SMEs will also gain access to advanced financial tools and data analytics, which comes in hand with most supply chain finance lenders, enabling businesses to make more informed decisions and improve their operations.

Supply chain finance is a proven way for businesses to reduce costs, increase efficiency and improve customer satisfaction by enabling a more predictable and consistent flow through their supply chain.

Moving Australian finance out of the Dark Ages

Banks are often hesitant to lend to SMEs, and the complex application process and stringent criteria can be a barrier to entry. Supply chain finance and working capital solutions offer a more viable alternative to SMEs. And as opposed to smaller business loans, the benefit of these finance solutions is that you’re tapping into a form of finance that will grow with your business, supporting its needs and growth today and well into the future rather than continuously writing up new debts.

It is essential that SMEs take advantage of supply chain finance and working capital solutions to ensure their success in today’s economic environment.

The government should also take action, by instituting supply chain standards that help and protect SMEs on larger projects and capital works.

By advocating for greater support for businesses, by educating businesses on the better finance options that are available to them — we can help SMEs remain competitive and position themselves for success in local and global markets.

Wayne Morris, CEO at Fifo Capital

Wayne Morris is committed to driving greater success for Australian businesses by making better business finance more accessible. Wayne actively challenges businesses and government to break free from conventional financial methods, and instead to embrace scalable, forward-thinking finance solutions that will foster more resilience across the business landscape and the economy.

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