A fresh wave of COVID lockdowns in China leading to more supply chain disruptions has left Australian businesses looking for new ways to stem cash flow problems.
Funding solution provider OptiPay has seen enquiries for trade finance triple in recent weeks as businesses find getting stock from overseas is harder, more expensive and is taking longer.
“It’s definitely global supply chain issues that are driving these enquiries,” says Optipay CEO Angus Sedgwick.
Since the beginning of March congestion levels at ports in mainland China have increased 30 to 40% after Shanghai was locked down due to the country’s zero-COVID policy.
“New lockdowns in China caused chaos once again. Some businesses are experiencing six week delays in receiving their goods while others are waiting up to six months,” he says.
“Trade finance allows them to free up working capital and not have it tied up while goods are manufactured and then shipped.”
“It’s also more cost-effective and flexible than a business loan or overdraft,” he says.
Mr Sedgwick says he looks for the following when assessing a business for trade finance
Established business – must be turning over at least $3mill annually making sales to other businesses rather than consumers
Selling products that are saleable to multiple markets
Ability to put 30% of the transaction as a deposit
Strong stock turnover
A recent survey from the NAB found supply chain constraints are a major issue for 28% of Australian SMEs. 1 in 4 expect it will still be a significant issue in 12 months time.
“Supply chain issues are going to continue to present as a problem for many businesses well into 2022 and now is a good time for them to re-evaluate how they deal with international suppliers and look at ways of reducing pressure on their cash flow,” says Mr Sedgwick.
“The global supply chain issues will no doubt be a key contributor to the predicted level of insolvency returning to pre COVID levels over the coming 12 months,” he adds.