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What is invoice financing?
Invoice financing, factoring or discounting, all three generally refer to the same service. It is a lending product for businesses which allows them to sell accounts receivable. Under this method invoices are sold to a factoring company for immediate encashment, usually an upfront amount of 70%-80%, while remaining amount (less financing fee) is paid on the due date of an invoice.
Who needs invoice financing
If your receivable cycle is longer than your expenditure cycle, you need to fill this temporary shortfall. Either you will have sufficient spare working capital, or you can utilise a financier to help fill this temporary shortfall. Invoice financing thus provides you great flexibility without long term commitment to meet your temporary cash flow requirements. Generally, receivable cycle is longer for the following industries:
- Transport and logistics
- Production / manufacturing
- Electricity, gas, water and waste services
- Earthmoving and excavation
- Health care and social assistance
- Advertising arts and media
- Education and training
Your business may have an unexpected large sales order or an opportunity to sell more, however, liquidity is the constraint. Invoice financing gives you the leverage to encash your receivables quickly and utilise these funds to increase your sales, hence improved profitability.
You might be in a business where your business only has seasonal requirements. Invoice financing is best suited for such situations and you pay financing cost only for the period you utilise while avoiding to hold cash in the off season.
Why invoice financing
Invoice financing is easier than conventional financing because you are actually selling an asset rather than getting a loan. The important element is that invoice should be from a creditworthy commercial client. Invoice financing has following advantages:
- Sell your invoice, rather than pledging your assets
- Funding needs anywhere between $5,000 to $500,000
- No real estate security needed
- Quick approval between 24 hrs to 48 hrs
- Subsequent funding much quicker i.e. 4 hrs
- Simple, straight and transparent setup process
- Complements your any existing banking facility
How Devanch can help
Being business consultants and accountants, we look at your business holistically. We do not look at financing in isolation nor do we try to sell you financing services. While working with you, we help you
- identifying pain points causing cash flow problems
- prepare future cash flows, both short term and long term
- meet your potential temporary cash flow shortages
- take advantage of any unexpected large orders
- meet your expenditures e.g. payroll, ATO, suppliers etc. in time
- increase sales
- reduce your stress because of cash flow shortages
To assist your business 360 degree, we have established strategic alliance with one of the leading finance companies. So far, it has funded over a billion dollar to Australian businesses. This gives you the comfort that you are dealing with an established finance company which can cater for your varied requirements, irrespective of the size of your business.
Please also visit our “Managing Cashflows” page and see how we are helping businesses in their cash flow management apart from financing support.
4 easy steps for immediate cash flow
The process to obtain invoice financing is very simple and straight forward. There are broadly four steps:
You have unpaid invoices and need short term funding
We discuss how much and when you need. Assist in verification
Finance company transfers you funds, usually within 24 hrs
Your customer pays the outstanding amount to the finance company.
Invoice Financing Features
Chose from one or more invoices as security
Fund your businesses fast between $5,000 and $500,000
No real estate security needed
Your first invoice can be approved between 24 and 48 hours
Subsequent funding can be as quick as 4 hours
Simple and straight forward process
Complements your exisiting banking facility
Get started or know more
Queensland: Brisbane, Cleveland, Logan City, Beenleigh, Gold Coast, Ipswich, Sunshine Coast
New South Wales: Sydney, Paramatta, Bayside Council (Rockdale), Shellharbour