Supply chain backlogs boost invoice finance demand - NAB

Major bank reports 22% lift

Supply chain backlogs boost invoice finance demand - NAB

A growing number of businesses are using invoice finance to get cash in the door to pay for goods amid supply chain backlogs, NAB says.

Recent bank data showed a growing number of its customers were using invoice financing, which allowed them to borrow against unpaid customer invoices.

The big four bank said invoice financing grew by 22% over the last year. Referring to the increase as a “post-COVID high”, NAB said on average, one million invoices were paid each month, enabling businesses to ease the burden of slower supply chains.

The retail and wholesale industries were the biggest users of the bank’s invoice finance service, showing a 30% increase year-on-year.

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NAB executive business metro Michael Saadie (pictured) said supply chain issues were a “hot topic” for businesses. 

The NAB invoice financing team were helping an increasing number of small-to-medium sized businesses keep their stock moving so they could get paid for goods sooner, he said.

“When I’m talking to customers, many continue to report cash flow as one of their key challenges, as well as ongoing concern around skills shortages,” Saadie said.

Access to capital could be a challenge for some businesses, particularly those that may not have fixed assets to secure against, he said. 

Saadie said invoice financing could help businesses get access to cash quickly, by unlocking funds within their unpaid invoices.  This reduced their dependency on “bricks and mortar” security, such as property.

“When businesses have the cash to pay their invoices quickly, they can get stock sooner and ensure other important payments are made promptly such as their team’s salaries. Ultimately, the quicker a business gets cash in the door, the faster suppliers get paid and the faster our economy moves.”

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Amid the COVID-19 pandemic, invoice financing had become critical to many businesses, NAB said.

Red Chamber, a seafood wholesaler based in Western Australia, approached NAB citing supply chain delays as a source of strain on their business. To receive orders that were held up at the port in Singapore, Red Chamber was advised they would need to pay three months in advance.

The wholesaler worked with NAB banker Phil Sinclair, who provided invoice financing to enable the order to be released.

Despite “challenging circumstances”, Red Chamber director Peter Revill said invoice financing provided a solution that enabled its business operations to continue.

“Most of our suppliers require payment on shipping, sometimes several weeks to months before the vessels release product,” Revill said.

“The cash flow benefits and flexibility this type of financing gives our company is critical in helping us keep the supply of product flowing through to our customers.”