Invoice Finance, also known as ‘Debtor Finance’, is a great way to provide positive cash flow to your business. Essentially, Invoice Finance works like a pre-approved line of credit that helps turn your outstanding invoices into immediate cash for your business. These facilities are useful for businesses whose debtors are particularly slow payers, and where immediate payment of the invoice is required to cover ongoing costs of labour, materials, new opportunities, other lending commitments, and even tax debt. Simply issue the invoice to your client and provide a copy to the lender and you’ll get access to funds almost immediately. Funds are generally available and in your account within a couple of days. For businesses with large outstanding debtor balances, this type of finance can free up a significant sum of working capital. The process for approval is usually quite fast, and since the lender takes ownership of the receivables invoice, no property is required to secure the loan.
Our Invoice Financing Promise
We’ll start by finding out what makes your company tick. What are your business’s working capital requirements? How profitable is your business? What could an injection of working capital do for your business growth? We’ll then get to work customising a lending solution that works for you. You may be a business that only needs a few unpaid invoices funded from time to time, or you may be getting set for a rapid growth period that requires every dollar you can get your hands on. Either way, we’ll weigh up the options and explain the pro’s and cons, and the costs and opportunities associated with each of these so that you can make an educated call on which route to take.
The Process for Invoice Debtor Finance
Business lending & invoice factoring chat
We’ll start with a detailed chat to find out what makes your business tick. What are your business goals? What does your cash flow look like? and what is your financial position?
Collect your information
We’ll then send you a small checklist and some links to provide the information we need to analyse your options.
Discuss your business loan options
Next, we’ll show you our findings and discuss the pros and cons of the business loan and debtor loan options available. This may include cash flow modelling and the affects of loan costs on your P&L.
Once you’ve decided exactly what limit, product, and structure you would prefer, we’ll get to work on arranging your approval apply for the loan.
Draw downs for Invoice finance work a little differently from most other loan types as you’ll draw your loan down each time you create an invoice. Once your invoice is paid by the debtor a portion of your loan is paid back. This cycle continues until such tiume that you no longer require the facility.
Invoice Finance Support
Since invoicing finance is an un-regulated finance product and security is taken over the invoices themselves, the application process is usually pretty simple. We have plenty of experience in these loan types and will make sure we take your loan to a lender that wants to work with you.
Invoice Finance is a very unique loan product. While it has its benefits, it also comes with very different fee structures. We’ll make sure you have a good understanding of these so that you can factor the costs into your business.
Once your facility is approved, your accounts team will need some guidance on how to manage the invoices and draw funds down from your facility. We’ll make sure they have all the help they need so that payments aren’t missed, and you can focus on running your business.
Healthy Cash Flow
Invoice finance is often seen as a short-term solution. If your business is profitable, then it’s only a matter of time before your working capital catches up with your cash flow requirements. We’ll be here to analyse the numbers with you and make sure your business is comfortable without the facility before you finalise the loan.
Documents To Provide the Lender
The documents you’ll need to provide for Invoice Finance may vary depending on the lender. At the very least, you may need to provide the following.
- Statement of position – The lender will want a clear picture of your current assets and liabilities.
- ID – As with any finance application, you will need to supply clear copies of your driver’s licence and Medicare card.
- Statements – We can send you a link so that you can authorise your bank to send us your statements.
- Balance sheet – A copy of your current balance sheet can be found in your accountant’s prepared financial statements for the most recent tax year.
- Debtors/Creditors report – Your Debtors/Creditors report shows the lender the balance of your current outstanding invoices as well as the invoices you are yet to pay.
We won’t ask you for more than we need, but we will always ask for everything upfront. This helps us to ensure that we can provide the best solution, the first time.
How can invoice financing help businesses grow?
Invoicing finance can provide an almost immediate working capital injection for your business. This may be used to fund new jobs, clear ATO debt for future loan applications, buying stock, or covering wages. Working capital requirements are often quite high for rapidly growing businesses. If your business is growing fast, it may be worth chatting with us to see if Invoice Finance is a good solution for you.
Why consider a business finance broker for invoice financing?
Invoice Finance facilities are offered by some of the majors lenders. However, these banks often require full vision on your trading figures and will generally want to hold property as security and take on any external lending facilities. We also have access to non-bank lenders who work specifically in the Financing of invoices space. Their approval process is fast. They won’t want to use your property as security, and their systems and processes are set up specifically to make sure that the ongoing management of your drawdowns and payments is smooth and simple. You don’t necessarily pay more for these lenders, and you don’t have to provide your organs in order to get the loan set.
FAQ's About Invoice Financing
Once you’ve issued an invoice for completed services, the lender will pay a pre-negotiated % for the invoice amount into your trading account. Depending on your agreement with the lender and your debtors, collection of the invoice from the debtor may be the responsibility of the lender or your accounts receivable team.
The interest and fee structure of your debtor finance agreement comes down to a number of factors. Ie, whether you intend to draw your facility down on every invoice you issue or just draw down on spot invoices, whether or not you have a broad range of debtors or rely on one or two, whether your debtors are known to the lender and have a reputation for paying their invoices on time.
In Australia, an Invoice Finance facility is a line of credit with a pre-determined limit that can be drawn down as a percentage of the balance of debtors on your balance sheet. Essentially, the lender takes security over the invoices you generate for your debtors, so no property is required to support the loan. Invoice Finance can help provide a much needed working capital injection to businesses with outstanding debtor balances and longer payment terms.
Invoice financing rates in Australia can vary, typically ranging from around 1% to 4% per month. The specific rate depends on your business creditworthiness, the industry you work in, and the terms of the financing agreement. Contact us for more details in relation to fees and charges.