ANZ abandons invoice discounting – factoring alert.

ANZ has abandoned its discount invoicing division (factoring) despite interest in the cashflow financing tool surging in the last 12 months as the downturn has worsened.

Invoice financing allows customers to borrow up to 80% of the value of outstanding sales invoices, relieving cashflow pressure for many businesses.

The Institute for Factors and Discounting estimates that the total turnover recorded for discount invoicing was $62.7 billion in the year ending March, a 16% increase from the previous year.

ANZ’s decision to abandon the practice comes after BankWest’s similar move out of the market last year. The other major banks continue offering discount invoicing.

 
Interestingly,  a number of  company liquidations and insolvencies performed by Liquidation Direct involve factoring finance.
The number of companies turning to this form of finance is increasing at present perhaps because of the impact of the economic downturn on other businesses and the inability of companies to manage their cash flow due to being unable to collect debtors in a timely fashion.
While factoring may be an appropriate form of finance for many businesses it should only be taken up with extreme caution, appropriate professional advice and a clear understanding of the significant costs and impact of the financing contract particularly where debts sold are not able to be recovered.