Invoice financing (or invoice factoring) is fast becoming a popular cash flow funding solution with Australian business owners.
Put simply, invoice financing is a way for a business to borrow money against the amounts due from customers (outstanding invoices/your accounts receivables). Essentially, the business sells their outstanding invoices as an asset at a discounted rate to a third party (such as Invoice Financing Australia).
The key benefits of invoice factoring include:
Invoices paid in 24-Hours
cash flow when you need it
No fixed term contracts
Use it when you need it
Low interest rate
lower rates than unsecured loans
insure against bad payers
The top Three Types of
Invoice Financing Options
Invoice factoring has been used widely by large businesses throughout Australia for decades. It is however only recently that smaller businesses are starting to take advantage of the cash flow benefits which can be achieved using this funding method. It is important to understand the different types of invoice financing available to ensure you pick the most suitable option for your business.
Single or Spot Invoice Finance
The simplest and most popular form of invoice financing, single or spot invoice finance is exactly what you’d expect. As a business you can pick and choose one single invoice, or a batch of invoices you would like to be paid and access the cash flow only as you require it.
Partial Ledger Invoice Finance
With partial ledger invoice financing the business can pick and choose which debtors in their accounts receivable they would like to turn into cashflow. A flexible option which allows the business owner to capitalise on profitable customers while leaving out invoices they expect to be paid quickly.
All of Turnover Invoice Finance
As the name suggest, all of turnover invoice financing involves a factoring company providing a credit facility to the full value of your outstanding invoices. This tends to be a popular option for businesses who are looking to rapidly expand and require access to as much cash flow as possible.
|Loan Type||Benefits & Suitability|
|Single or Spot Invoice Finance||Facility term (Open ended)|
Any business purpose
A flexible lending facility which can be used at any time allowing you to only utillise the facility for the capital that is required.
Save on fees by only submitting the exact invoices you need paid.
|Partial Ledger Invoice Finance||Facility terms (Open ended)|
Any business purpose
Ability to pick and choose which debtors you utilise the credit line with (exclude invoices you know will be paid quickly to save on fees).
Suitable for business who require a moderate cashflow boost and could benefit from a 20% or 30% rise in availble cash on hand.
|All of Turnover Invoice Finance||Facility term (Typically minimum 12-months)|
Any business purpose.
Help with managing the health of your accounts receivable and support with debt collection.
Suitable for business experiencing rapid growth requiring a strong cash flow position.
Invoice Financing work?
The process for releasing your cash flow from your invoices is quite simple. When you generate an invoice to be sent to one of your customers you also send a copy of the same invoice to the invoice financing company. Once the invoice has been received you will then be paid an agreed upon amount of the invoice value (usually within 24-hours).
Create an invoice
send an invoice to your client
Send a Copy
send a copy to your chosen financier
Get paid in 24-hours
receive a percentage of the invoice up-front
Receive balance of invoice
final balance less fees payable
How much does invoice financing cost?
Like a traditional term loan there are a number of different factors which will determine the cost of an invoice finance facility. These typically include: Time in business, credit worthiness, industry/type of business, total loan amount required (invoice value) and type of invoice finance facility required (spot, partial ledger, all of turnover).
Expect to pay a small fee (otherwise known as a factoring fee) on each invoice which is financed as part of your facility by the lender. This fee is a small percentage of the invoice and will be deduceted by the financier when the invoice is paid in full by your customer. The balance of the invoice is then paid back to you.
Do I need to provide any security? (Like the family home)
With invoice financing the invoices themselves are the collateral which is being offered to secure the money borrowed. As such, any business or personal assets outside of your accounts recievable are not required when you establish an invoice financing facility. Important to note, you will typically receive a better rate for an invoice financing facility over other short term (unsecured) lending options available today.
- What is invoice financing?
Invoice financing is a fairly simple concept when you break it down. As a business you issue invoices to customer for products or services you have provided. These are essentially assets on your company ledger. The total amount owing to your business via your outstanding invoices can be bought or sold just like any other asset your business owns.
Essentially, the way invoice financing works is you are selling your outstanding invoices as an asset at a discounted rate to a third party (such as Invoice Financing Australia). The benefit for your company is you get paid immediately for your product or services provided and can use that cash flow back in your business right away.
- How do I know if I qualify?
What is great about invoice financing is that almost all business are suitable and able to use this type of cash-flow finance.
If you operate a business which provides credit to your customers (i.e. you deliver a product or service to your clients and issue an invoice for payment), then you’re a good fit for invoice finance.
- How long does it take to get paid for an invoice?
At Invoice Financing Australia we have a dedicated team who work hard to get invoices paid quickly so you can get on with more important things in your business. If an invoice is sent to our team for payment you can expect payment into your nominated account within 24-hours.
- What is the maximum finance amount?
At Invoice Financing Australia we service business across Australia both big and small. We have invoice finance solutions putting cash-flow back into businesses ranging from $5,000 up to $5 Million.
- How long does the application process take?
We have a fast and simple online application process. Simply complete the simple form on our website (5-minutes) and you will have an offer tailored to your business within a few hours (during business hours).
- How much does invoice financing cost?
Invoice Financing is not treated like a conventional business loan with regular weekly or monthly payments. Instead, Invoice Financing Australia will fund your business in advance against your invoice value. 80% of the invoice value is funded on the invoice issue date with the remaining 20% paid back to your business (minus a small administration fee) when the invoice is paid in full.
The total cost of the administration fee for providing the capital up front varies from client to client depending on total capital required and the individual businesses invoice payment terms. However, be aware it is generally a far lower cost and strain on cashflow than other traditional short-term funding options.
- Do I need to provide any security?
No. The outstanding invoices for your business are all the security that is required. This is why invoice financing can be a great choice to conventional funding options that can require you to put down large assets as security (such as the family home).
This could be a good fit
for my business
Where do I get started?
Invoice Financing Australia is dedicated to working with Australian businesses to release their cash flow from their debtors allowing capital for general operations and growth.