Also known as Factoring and Invoice Finance, it is a short term facility which enables suppliers to collect up to 80% of the value of all outstanding invoices upon settlement, with the remaining 20%, less a fee, paid on collection of the debt. Cash flow is as good as it can get in this climate of slow pay by government and the corporates with the muscle to get away with slow pay policies.
While Debtor Finance is mainly used by wholesalers, manufacturers, trucking, and labour-hire companies, it seems to me that it could be an excellent way to ease the crisis among the long-suffering suppliers to the NSW Department of Health. Many have been forced to withhold products or services pending the government’s payment of overdue invoices, many of which are well in excess of 90 days. But, therein lies an issue for lenders of Debtor Finance; those with whom I’ve spoken so far don’t want to know clients with receivables over 90 days.
I’ll keep looking, because the public health sector, now financed by the feds to the tune of 60%, is surly a good credit risk. It’s a grossly underfunded enterprise, but we’re not one of the PIGS. Surely there’s a debtor finance supplier willing to stretch the nominal 90 days for ongoing government revenue streams. It would be a real ‘win-win-win’ for governments suppliers, who get much better cash flow, for public hospitals, who get a resumed supply of products and services and less hassle from suppliers about overdue invoices, and for the lender, who gets a new market.
The only loser in all this is the taxpayer, who will inevitably pay more for the public health system, because suppliers will increase their prices to cover the cost of the governments’ inability to pay their debts when due.