Myth 1. My customers will think my business is in trouble
Reality: Cash flow is the lifeblood of every business and many business owners recognize that invoice factoring, or debtor finance as it is also known, is simply a tool for managing and stabilizing cash flow. Used as it should invoice factoring can help increase profits and promote growth. It enables businesses to grab opportunities which might not otherwise be available when working capital is tight. You can explain this to your customers and remind them that the Australian industry is worth over $65 Billion dollars a year. The are some fairly large and successful companies using this source of finance.
Reality: We specialize in selective factoring. In other words, we will factor a single invoice as opposed to your entire debtor’s ledger and, because of that, it is a competitively priced facility. Typically, the cost ranges from between 3% – 5% of the invoice amount. There are no application fees, account fees or other fees.
It is also important to remember that the fee is not an annualized interest rate. If we charge you a 5% fee for an invoice in one month, that does not equate to 60% a year. Our fee is collected the day an invoice is paid. If we purchase 10 invoices from you over the course of a year total fees will still amount to 5% of the invoices sold.
Myth 3. My customers will be annoyed about being hassled by a finance company.
Reality: We suggest that before entering into an invoice finance arrangement you discuss it with your customer and explain that all they are required to do is confirm the invoice is valid and change the remittance details. It’s as simple as that. Most businesses are amenable and many already have some kind of invoice factoring facility. We go out of our way to ensure we do not interfere in the relationship between you and your customer.
Myth 4. I will be locked into a long-term contract when all I need is a short-term facility.
Reality: We buy single invoices. You are not handcuffed to us by a contract and required to sell us all your receivables. You control the relationship. You can ask us to fund one invoice or a number. You can choose to do so whenever you like.
Myth 5. I only have one customer and the factoring companies don’t like that.
Reality: We are a bit different to most invoice factoring companies. We will accept that your invoices may be issued to just one or two customers. We’ll provide funds to you as long as your customers have a good record of payment and are financially sound.