WFY’25: ‘Business cash flow remains the key driver for Australian SMEs’

Craig Michie, Group Executive Asset Finance and Client Acquisition, ScotPac Business Finance discusses the latest developments in Australian’s factoring market in the regional article featured in the most recent edition (2025) of the World Factoring Yearbook (WFY’25).
Below is an excerpt from his brilliant article.

The value of the Australian factoring and invoice finance market rose to an estimated AUD 91.69bn in 2024, representing approximately 3.4 per cent of Australia’s GDP of AUD 2,700bn. Based on industry data, the total marked a 6 per cent increase from the previous year’s estimate of AUD 86.5bn, driven by a healthy rise in overall commercial financing volume, including a notable surge in demand from medium-sized enterprises employing between 20 and 200 people.

While Australia’s economy achieved its thirteenth consecutive quarter of growth in 2024, the rate of expansion was the weakest recorded since 1992 (excluding the COVID-19 period) as economic conditions remained challenging for various sectors. Analysis from the Reserve Bank of Australia (RBA) concluded that “growth in demand has slowed while input costs remain elevated, putting pressure on profitability.”

Sectors most dependent on discretionary consumer spending, including hospitality and retail trade, were especially prone to cash flow uncertainties. However, conditions varied significantly by industry, with the gap between Australian businesses experiencing very high growth and those experiencing very low growth reaching an all-time high. An increasing number of businesses at both ends of this spectrum turned to factoring and invoice financing to either drive further growth or enhance access to working capital.

FACTORING INDUSTRY ENVIRONMENT
There are 2.66 million businesses in Australia, or around one business for every 10 people in the country. The business sector in Australia is dominated by small and medium enterprises (SMEs). Ninety-seven per cent of businesses are described by the Australian Bureau of Statistics as ‘small’ firms with less than 20 employees, while a further 2 per cent are classified as medium-sized. Construction is Australia’s biggest industry in terms of the number of businesses, with more than 450,000 actively trading.

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To read the whole article and 42 other specialist articles and country market reviews, order World Factoring Yearbook here.