Invoice Debtor Finance

• Any Australian business with an ABN
• Your business is selling to other businesses
• Sales invoices which take longer than 15 days for payment from customers
• If your business needs funding for cash flow or growth

• If your business raise invoices to other businesses on standard trade credit terms, those invoices can be considered for funding. Generally, invoices to private individuals are not suitable for this type of finance.
• Sales invoices older than 90 days cannot be funded through debtor finance.
• Invoices must relate to goods delivered and/or services fully completed. Milestone invoices and progress claims are not suitable.

Generally, there is no need to send invoices. However, some type of invoices may be removed from the arrangement by invoice debtor finance company.

Once the debtor finance facility is approved, the Invoices your business submit are processed on the same day and approval is usually given within 24 hours to enable you to draw down from your account.

Generally, yes. Most of the invoice debtor finance companies in Australia understand that businesses experience cashflow problems along the way. Call to see if the debtor finance company can fulfil your needs.

Essentially, any business which provide goods or services and raise invoices with normal payment terms, often between 30 to 90 days, are able to get an advance on the monies owed to that business from customers. An invoice debtor finance could be a suitable financing option for keeping cash flowing If your business has a long working capital cycle and is cash-hungry.

Invoice finance allows your business to access working capital a lot sooner especially if your business is growing fast. As your business sales are increasing, the invoice ledger grows too. With Invoice Debtor Finance your business would be able to tap into that as a source of funds to help with working capital. This way of funding your business cashflow is more flexible compared to a typical business loan or an overdraft facility from a bank, which are often limited by the security attached to the business loan. Invoice finance offers your business a better control over your business cash flow.

For instance, if your business had a $50,000 overdraft limit with your bank and needed to access some additional funds, your business wouldn’t be able to borrow more than $50,000. However, if your business had $100,000 in outstanding invoices, then with invoice debtor finance will potentially will give access to about $80,000.

In general, debtor finance suits any business that has a long lead time between purchasing materials required to complete the work and the final invoice when the sale is completed. Typically, any businesses operating in fashion, manufacturing, transport or wholesale sectors can utilize invoice debtor finance to help with cashflow finance needs. If your business is not operating in the above sectors, not to worry. Give a call to any of the invoice debtor finance companies in Australia which are found on this page as some of them do provide invoice debtor finance to other sectors as well.

Debtor finance or Invoice finance is where you are using invoices generated to access additional fund. A debtor finance company advances a percentage of money against outstanding invoices that will be paid at a later date by your customers. It can vary from one single invoice or a whole ledger with millions of dollars in outstanding invoices from multiple different invoices with 10 or more different customers. That is debtor financing or invoice financing.

On the other hand, cash flow finance is any type of business finance which is helping with the cash flow in your business. This can include trade finance in an importing or exporting business, supply chain finance, debtor finance or even cash flow lending, which is where a financier can lend money based on evidence of your previous and likely future maintainable revenue.

Cashflow finance or supply chain finance is a good way introduce additional funding to your business cashflow, for instance, if your business need to purchase the raw materials 2 to 3 months in advance before you can even commence the work. In this case, a supply chain finance facility could be a useful option.

The simple answer is, yes.

In general, if your business provide services to the local or state governments or any well known companies then the debtor finance companies in Australia would usually be happy to lend because a payment dispute is unlikely.

On the other hand, if your clients are mainly several small businesses or low-value invoices, then the debtor finance companies might not want to lend or at the very least would charge a considerable fee to manage and handle that volume of invoices.

What makes debtor finance so useful in a business turnaround?

A debtor finance is one way your business can quickly introduce cash back into the business which will allow management to make the necessary changes, fix up any problems in the short-term and get it back on track as soon as possible.

Up until recently, there are only two main banks plus a couple of other regional banks offer debtor finance. However, there are several debtor finance companies in Australia including specialist debtor finance companies, some of whom have a greater risk appetite.

Talking to a debtor financing company or a commercial business loan broker to discuss debtor finance is certainly an option, however, as with any decisions related to finance, it is best to seek additional financial advice beforehand to ensure this approach to help your business cashflow and the about potential business lender will actually resolve the underlying cash flow issues and end up with a debtor financing solution that is not suitable to your business and personal requirements.

The main issue usually, is with people not paying enough attention to debtor finance and how it works within the business. Debtor finance or cash flow finance is not something that you can put in place and forget about. You need to manage debtor finance and there are compliance requirements which needs to be maintained.

If debtor finance is not managed properly, a business could suddenly run out of cash completely. This happens when your debtor finance company finds all debtors have not been managed properly and are all older than 90 days so it cannot advance any more funds. It is not an under-statement when we say the ongoing credit control at your business really matters to ensure your business won’t wind up starved of cash.

An important thing to take note is that there are limitations due to each debtor finance companies’ covenants as to what the debtor companies can lend or what they can advance. This becomes critical, if your business changes the type of work you do or changes the terms with your clients, this may no longer be in line with what the debtor finance companies originally agreed to and can have some impact on your cash flow finance needs.

Another thing to keep in mind is the declining market demand for your products or services. A business which might have $100,000 worth of invoices today, next month might only have $70,000. This will result in a declining ledger which can catch up and the business greatly if the business over spend or are not keeping track of the decline in the market.

Also be aware that most of the debtor financing companies in Australia are required to do audits or independent checks with your customers to ensure all information is accurate. This level of review will depend on the specific debtor finance company.

A confidential debtor finance facility is offered to a business where it is determined that there is low risk in a business. A debtor finance lender will assess the ledger, its clients (government, blue chip companies or small businesses), how long the business has been operating for, is the business well run, with very capable management and it’s consistently profitable. In that case, it is likely to have a confidential facility. The debtor finance company will register its security and advance the money, but your customers will not know of the debtor finance company’s involvement. That’s a confidential debtor finance facility.

When a disclosed debtor finance facility is provided to a business, it will have noted on all invoices that the invoiced debt has been assigned to an invoice debtor finance company. The customers of the business will also know this because at the very outset they all acknowledge to the debtor finance company that the debt is due and assign the debt to the finance company. That way the finance company can ensure security over the invoices that they’re lending against.

Generally, any service or products that have been invoiced and is up to 90-days old, can be funded through invoice debtor finance. Costs of funding through invoice debtor finance can vary from one invoice debtor finance to another and the rates, fees and charges all vary depending on the risk and type of facility offered by the invoice debtor finance company.

It is very common, two different businesses in the same sector or industry might get very different pricing for a whole range of reasons including size of the ledger, different risk and the amount of work expected. It is not unusual for one company that has been through a few troubles might find their finance more expensive and have more rigorous checks around the process than their competitor in the same area.

Debtor finance costs could be a base rate plus an applied margin or simply a flat fee per invoice.

When choosing an invoice debtor finance provider for your business, the important thing is not to always get fixated on the rate. It is best to focus on the debtor financing solution offered even if the debtor financing company’s pricing can look expensive, especially, when it’s annualised. It is best to focus on the solution is the debtor finance company giving your business and the ability to access working capital that you wouldn’t have otherwise. Also, think of the opportunity cost if your does not have the invoice debtor financing facility and it’s effect on the profitability and long term viability of your business.

Disclaimer: This article is general in nature and is not to be taken as financial advice. You should consider seeking independent legal, financial, taxation or other advice to check how information relates to your unique circumstances. The publisher of this website is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly.