Business Invoice Finance across Australia
Throughout Australia there are commercial facilities facing cash flow challenges because their customers take a long time to pay their invoices. Some customers may demand payment terms of 60 days or 90 days or in excess of 120 days and commercial enterprises may not have any option but to accept the terms or lose the trade.
Delays in debtor and invoiced payments can seriously impact the ability to meet its own expenses, wages and debts and to invest in growth strategies. Raising issues that may result in the organisation facing their own credit record.
Fortunately, the lending sector offers a workable and cost-effective solution – Invoice or Debtor Invoice Finance for Businesses.
Explainer: Debtor Invoice Finance
- A specialised form of loan available.
- Provided by non-bank commercial lenders.
- Enables better management of cash flow.
- A loan product which attracts an interest component and a fee component.
- The lender pays a greater portion of invoices when the invoice is received and a lesser portion, the balance, at a later time when the customer has actually paid the invoice.
- The organisation is therefore paying interest on the amount of money the lender is covering for that period of time.
- In establishing this type of facility, to minimise the cost of the interest paid, businesses need to have a good idea of how much funding they require immediately, ie in the short term, and how much they can realistically wait to receive.
How Invoice Financing Works For Business's
Setting up Invoice Finance may vary from lender to lender but the usually accepted and followed procedure is as follows:-
- A commercial lending broker can, negotiate approval for an invoice finance facility with a specialist lender.
- Negotiations are similar to loan negotiations and cover the interest rate which will be charged, whether that will be at a fixed or variable rate, the fee to be charged by the lender, the terms of the loan facility and any conditions to be applied.
- The critical element to be agreed on is what percentage of the invoice the business requires the lender to pay immediately on receiving that invoice. For example, the initial payment to be made by the lender may be 80% of the value of the invoice, or 95% or whatever the pre-agreed percentage is set at.
- When the business completes work for a customer, an invoice is raised and sent to both the finance lender and the customer.
- The bank account into which the customer is directed to pay the invoice is an account at the business lender’s facility but in the name of the business.
- When the lender receives their copy of the invoice they pay the commercial enterprise the percentage as has been agreed on.
- The customer proceeds to pay the invoice in their usual payment terms.
- When the lender receives the full payment from the customer, they pay the balance of what is outstanding. That is, the final 20%, 5% or whatever value has been pre-arranged.
- The enterprise is charged interest on the amount extended for that time period.
- A fee is charged by the lender based on the invoice values.
Business Invoice Finance in Australia
Invoicing for a business can be a saver for many operations. A relatively low cost solution to support cash flow. We have connections with lenders that provide this type of loan and we can share the contacts with you.
Connect with us for contacts with lenders that offer invoice finance in Australia.