Invoice finance factoring
Invoice finance factoring
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What is invoice finance factoring?
Invoice finance factoring is when a third party (a factoring company) can buy your invoices in exchange for a lump sum of cash. Then, the factoring company owns the invoices, and they get paid when the late invoices are paid. Instead of waiting for your payment through invoices, you receive immediate funds to continue the business running. Most of the time, businesses will receive 80% of the invoice value immediately. Depending on arrangements, the collection of invoices can be managed by the factoring company.
Invoice factoring: other benefits
There are some major benefits to factoring, especially the immediate cash injection for your business. Other advantages include:
- There are numerous benefits to businesses that choose invoice factoring:
- Bridging the gap between slow payments
- No waiting – have the immediate cash flow to keep your business going
- Be ahead of ATO obligations
- Use early repayments to grow your business
- No collateral, credit score and loan history
- Easier to receive than business loans
Invoice finance factoring: disadvantages
- Total costs could be higher than other small business loans: when choosing a provider take into consideration any hidden cost (admin fees, transfer charges and any penalties).
- The profit margin reduces on each invoice sold.
- Damages the relationship with your clients: amounts due could be aggressively collected when selling your invoices. You are also indicating to your clients that you have a cash flow problem, and they may decide to stop dealing with you.
- Limited opportunity to do business with specific clients: some lenders when checking the credit rating of your clients, may try to limit you when dealing with high-risk clients.
- If some invoices are not paid, with recourse financing, you will have to buy back any outstanding invoices.
Invoice factoring: how to apply
We help you through the process and we put you in contact with the lender that offers the type and size of business loan that meet your needs. Our partners assist eligible small businesses with invoice factoring.
Lending Connect is the preferred and trusted finance broker for hundreds of small and medium local businesses in Australia. It all starts with an enquiry. Call us 1300 911 621 or click on “get started now” and we call you back to see if you qualify for invoice finance factoring.
Our lenders usually require a combination of the below as a part of an application:
ID documents
A list of your customers
Copies of the invoices you want to factor
An aging report for your accounts receivables, showing how long those customers generally take to pay
Access to your accounting system
