Invoice finance factoring

Invoice factoring is a helpful way to keep up with the amount of cash owing to your business.
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Invoice finance factoring

Small businesses often struggle with having enough cash flow to sustain the business. Invoice factoring is a helpful way to keep up with the amount of cash owing to your business, especially when you need cash as soon as possible. Also known as ‘accounts receivable finance’ or simply “factoring”, is a type of business finance that can offer a quick boost to your cash flow.

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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. Read the definition on Wikipedia.

Invoice finance factoring benefits

Invoice finance factoring: benefit

For instance, a customer buys your product for $5,000. However, they agreed that the invoice would be paid within 30 days. You have urgent fees, wages and expenses to pay tomorrow. Invoices that you are waiting for can be bought by a factoring company at a discounted price for immediate cash. For instance, if it was discounted, the business will receive 80% of the invoice value. In this circumstance, the business would receive $4,000.
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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
other benefits

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 finance factoring disadvantages

Invoice factoring: how to apply

At Lending Connect we have developed a one to one approach that allows us in 99% of the cases to get the money in our clients’ bank account within 1 day from the application. With our network of 50+ business loan providers, we open credit opportunities for your business.

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:

01

ID documents

02

A list of your customers

03

Copies of the invoices you want to factor

04

An aging report for your accounts receivables, showing how long those customers generally take to pay

05

Access to your accounting system

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(100% free consultation – not affecting you credit score)

or call us now

1300 911 621

Invoice finance factoring