Many Australian businesses use invoice finance as a safety net.
It’s protection for when cash reserves run low.
The industry’s annual turnover is $60b a year which indicates this tried and tested strategy is very popular.
Invoice finance goes by a number of names. It is also called factoring, invoice discounting, debtor finance, accounts receivable finance.
But, they all mean the same thing.
Say, you provide a service or product to a customer and issue an invoice.
Instead of waiting 30, 60 or 90 days for the invoice to be paid you sell it, at a small discount, to gain the advantage of having cash in your hands immediately.
That’s cash you can use to acquire more inventory, to pay staff, to meet your overheads.
There are two approaches to invoice finance. Each meets a slightly different need.
The first to consider is called spot factoring or single invoice finance and is good if your business has a temporary cashflow problem.
You may just want to sell one or two invoices and not want a long term relationship with a bank or major finance company in fact, you
probably want to keep the bank out of the picture altogether.
If that’s the case this is the product for you.
It allows you to seize an unexpected opportunity, or meet a pressing need during a period of financial stress and then move on when things settle down.
Long term needs
The second option is for businesses with long term needs. Generally, they are in a strong growth phase and need significant and ongoing cash reserves to maintain momentum.
If you are in this position then you’ll need to talk to a bank or specialist finance company which covers this area. They’ll expect your business to be established, have a reasonably strong turnover and be willing to enter into a contract.
So, how do you determine which of these approaches best suits you?
Call for factoring advice
My number is on this page. We can talk about it informally.
If you prefer, complete the contact form and we’ll call you.
I’ll tell you which type of invoice finance suits your needs and ensure you meet with the appropriate professionals who can make it happen.
While we are based in Brisbane, our network of invoice finance specialists extends around the country and we can put you in touch with someone close by.
To learn more about invoice finance, how to judge its impact on your business and its benefits please watch the other videos or call me on 1300 430 076.