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It’s hard to believe it is July already. It’s amazing how quickly time passes when you are busy! July heralds not only a new financial year but also marks the end of my 1st year back at ScotPac Business Finance. It’s been an exciting year with many highlights. Our sales team grew by 50% as we hired more BDMs in Victoria and WA. Our book grew by 20% which is well above the industry average. We commenced the decentralisation of our Operations team by opening an Operations office in Sydney. We plan to open an operations office in Victoria later this calendar year.

We have exciting plans for the coming year, including another year of significant growth. With our new sales team in place we feel confident that we can again grow our book by 20%.

The Economy

As we start the new financial year it is becoming more apparent that our economy is slowing. A sure sign that the economy is slowing is the blowout in tax debt to $35Bn - up 9% on the prior year. In an effort to combat this blowout the ATO recently announced a plan to “reinvent the ATO”. Part of this reinvention involves the ATO reducing the average value that it will start winding up businesses with arrears – down from around $350K to $90K. Some observers have seen cases as low as $30K in recent times. The key is to ensure BAS and Activity Statements are lodged time, businesses stay in contact with the ATO regarding arrears and have good strategies to guarantee cashflow is as good as it possibly can be – a great way to do this is through invoice finance.

Another tool that the ATO is using is ‘Garnishment’. If a business has arrears owed to the ATO, the ATO has a right to claim money owed to that business by other parties. They do that by writing to known debtors of those businesses and writing to all of the major banks. The ATO has, over the years, utilised this avenue more vigorously as tax arrears have blown out and commenced using this tool again around a year ago. It is a blunt instrument that puts some well-meaning businesses in difficulty. They key for businesses is to have strategies to ensure that cash flow is as strong as possible and that they lodge their Activity Statements on time and stay in contact with the ATO regarding arrears.

Looking to other elements of the economy, a potential negative is the decline in building approvals. Australian Bureau of Statistics (ABS) Building Approvals show that the number of dwellings approved fell 0.1 per cent in May 2015, in trend terms, after rising for 11 months. The value of total building approved fell 0.9 per cent in May, in trend terms, and has fallen for three months.

Another negative is that Australia's estimated, seasonally adjusted, unemployment rate for June 2015 was 6.0 per cent, an increase of 0.1 percentage points from a revised 5.9 per cent for May 2015. In trend terms, the unemployment rate was unchanged at 6.0 per cent, as announced by the Australian Bureau of Statistics (ABS) today. The seasonally adjusted number of people unemployed increased by 12,800 to 756,100 in June 2015.

One positive is that the latest Australian Bureau of Statistics (ABS) Retail Trade figures show that Australian retail turnover rose 0.3 per cent in May following a fall of -0.1 per cent in April 2015 (seasonally adjusted).

New Products

Australian small to medium sized businesses involved in exporting or supplying in to export projects now have a new financing option, with the announcement recently that FactorOne has been approved to partner with the Federal Government's export credit agency, Efic.

Traditionally, Efic has partnered with the major banks to encourage Australia's export industry. While this will continue to be the case the new arrangement with FactorOne, the first non-bank to be approved by the agency, will enable them to offer solutions to a wider range of businesses.

Efic supports Australia's export industry by guaranteeing commercial finance facilities taken out by Australian companies exporting or operating in the export supply chains, helping them to expand their businesses overseas and to source opportunities in emerging and frontier markets.

Not only will FactorOne be able to provide funding for exports, it will also be able to provide the security of credit insurance should the debtor fail to pay.

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