In an ever-evolving global economy, the banking and finance industry finds itself facing a crucial question: Will it continue to operate like an ostrich with its head in the sand, or will it adapt to seize the major growth opportunities that lie ahead? As we peer into the next 30 years, it's evident that growth will be intricately tied to projects in sectors such as Defence, Renewables, Circular Economy, Space, and Advanced Manufacturing. What's more, the fulcrum of this growth will be the participation of Small and Medium-sized Enterprises (SMEs), necessitating greater access to working capital and cash flow funding.

The Growth Potential is enormous. The forthcoming growth wave is set to reshape industries, with contracts linked to Defence, Renewables, Circular Economy, Space, and Advanced Manufacturing projected to take centre stage. These sectors are estimated to contribute a significant portion of economic growth over the next few decades. However, the catch is that SMEs will play a pivotal role in driving these projects forward and that requires working capital and cash flow. As such, facilitating their success is non-negotiable.

For the banking and finance industry, particularly the Invoice Finance sector, the call to action is clear. To align with Australia's long-term aspirations, they must change their conventional approaches and address the needs of SMEs in this transformative era. Currently, the approach taken by many Invoice Financiers in Australia lacks flexibility, often requiring brick-and-mortar support for funding of Contract based Receivables Financing, which paradoxically limits the efficient use of available security and impedes the SMEs' ability to support their long-term goals. Furthermore, often risk is assessed on a pre conceived view of subcontractors without due consideration of the underlying financial performance or strength of counterparties which are often Blue Chip or Govt/Semi Govt.

There are a number of pivotal steps that need to be taken to ensure a symbiotic growth trajectory for both SMEs and the finance industry which include:

1.     Enacting Empowering Legislation: The success story of the UK's Business Contract Terms (Assignment of Receivables) Act 2018 provides a powerful precedent. This legislation abolished contracts' ability to prohibit financial assignment, streamlining invoice financing for SMEs. Following suit, Australia should consider implementing similar legislation. By empowering SMEs with easier access to working capital, we can stimulate economic growth, drive job creation, and foster innovation.

2.     Strengthening Payment Security: Despite significant progress through Security of Payment Acts introduced by Australian State and Territory Governments, certain barriers persist that hinder invoice funding. Enhancing this legislation to ensure payment schedules represent an unconditional commitment to pay would unlock working capital for SMEs. This reinforcement could bridge gaps in cash flow and support their growth ambitions.

Success needs a collaborative Approach. To achieve the outlined goals requires a unified effort from various stakeholders. Industry players, industry bodies, government entities, and the finance sector must collaborate to chart a course towards a more supportive financing ecosystem for SMEs. By combining their expertise and resources, these stakeholders can collectively enhance the SME landscape, positioning them as pivotal contributors to Australia's economic well-being.

The winds of change are sweeping across industries, driven by transformative projects and fuelled by the ingenuity of SMEs. The banking and finance industry, epitomized by the Invoice Finance sector, stands at a crossroads. Will it remain static, or will it rise to the occasion? By embracing and supporting empowering legislation and refining their approach to SME financing, the finance industry can empower SMEs  to not only survive but thrive in the dynamic landscape of tomorrow. In this collaborative journey, industry players have the opportunity to shape the future, fostering growth, innovation, and prosperity for all.