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Factoring your Invoices Here are 3 benefits

Invoice finance sometimes called debtor finance or just factoring,is a huge boon to small and medium sized businesses. They allow the business owner to leverage the assets of the firm in a productive way through receivable finance. In this way using the invoices of the business, the owner can gain access to small business working capital without much hassle and in time to meet the necessary expenses.  For business owners who are not familiar with factoring, the immediate advantages may not be very apparent. In effect, there are three main advantages to when you opt for this kind of debtor finance.

Business Working Capital Professional Fee Funding

Business Working Capital for Growing Businesses

  1. Cash availability: For a small or medium business that has to keep pace with competitors who are bigger and better established the key concern is liquidity. Often, bigger businesses or those that have been in the niche longer have capital reserves that allow them to adapt to market changes quickly or to increase inventory or production at short notice. With the lack of much capital hampering it, small businesses often fail to remain competitive in the marketplace. By taking advantage of invoice factoring, these businesses can bridge the gap.
  2. Outsourcing collection: Another important yet time and resource consuming task that often erodes a small business’ ability to stay agile in the marketplace is invoice collection This is often a very complex and long drawn process that needs the investment of much manpower. A small business may lack the ability to dedicate human resources to invoice collection but this impairs its ability to ensure that debtors pay on time. The small business cannot afford to allow invoices to remain unpaid because this impacts its working capital availability. This problem is addressed by factoring too because the factoring agent takes on the task of invoice collection. In effect, the small business owner outsources invoice collection to the factoring agent.
  3. Invoice Factoring for Business Growth

    Invoice Factoring for Business Growth

    Debt avoidance: What is the option open to small businesses if they need cash to meet an emergency expense or if they lack funds to match their expansion plans or production increases? They have to look for lenders willing to make a loan to them. If the business is a new one, this may prove to a tough task. The loan, even if available, may be a very expensive one that results in a huge drain on the business’ finances on a recurring basis. With factoring this debt burden can be avoided completely because the asset being used is the business’ own invoice and cash is advanced against this asset so no repayment is required.

You can apply for Invoice Finance right now

How Does Invoice Finance Help Your Business

Is this Your Business?

In any business where selling of goods and services is involved, an invoice is generated. The invoice usually contains the contact information of the vendor and the customers. Invoices also have detailed information of the entities being billed. A unique number is assigned to each invoice for easy tracking and record keeping. This works as the proof of the account receivables which the customer has to pay.

If the items have been sold on credit terms, then it often takes 60 or even days for the payment to be made. Businesses that sell on these terms turn to invoice financing, sometimes called debtor finance or invoice factoring to maintain a steady cash flow.

Business Working Capital Professional Fee Funding

Business Working Capital for Growing Businesses

Invoice factoring can deliver funding against sales invoices meaning the business owner can get funds advanced from the factoring company against their unpaid sales invoices.

In other words, invoice discounting is the process by which a company can get funds advanced to them from a Factor based on their unpaid account receivables.

Is Invoice Factoring Finance hard to get?

Invoice financing can be accessed by the company (or seller) which is entitled to collect payments from its customers. However, the amount borrowed or advanced and the discount for fees for the factoring services varies with different factoring company.

Factoring loans or advances are generally easy to get and usually are much less cumbersome difficult for the business owner.

The account receivables funding companies can assist in the collection of payments from the customers and this lets the business owner concentrate on running and managing his business which is a better use of their time.

Other Advantages

Business Cash Flow Solutions for Business Growth

Business Cash Flow Solutions for Business Growth

Another advantage of invoice discounting or receivables finance is the release of the cash which is locked up in the debtor’s ledger and not able to be used in the business until the customer pays the invoice.

Business owners should use factoring companies which have reasonable invoice factoring rates but also ones that understand them and their business and are keen to help their business grow.

 

 

What business are suited to Factoring Finance

Factoring and debtor finance is best suited for small and medium sized business owners who are looking for a working capital to expand their business.

With the help of account receivable financing, usually up to 80%  of the invoice amount can be received within 24 hours.

 

 

Factoring or Debtor Finance – a Cashflow Solution for Business

Factoring is a term used for a financial product where funding is provided against accounts receivables, that is the unpaid sales invoice of a business and typically a small to medium business or SME.

This is a very efficient means to keep the cash flowing in any business that sells on credit terms.

The three parties that are involved in a factoring transaction are: –

the Owner of the business who sells or assigns the rights to their account receivables in exchange for prompt funding,

the Factor who provides the funding to the business owner (that is the Client of the Factor) and of course;

the Customer or debtor who is in fact the customer of the business owner and will be responsible to pay the debt (that is the sales invoices) to the factor.

The amount paid by the debtor Is the full amount of the invoice however the initial advance to the business owner is usually an agreed amount that can be up to 80% of the invoice amount.

The account receivables, that is the invoice or a batch of the invoices must be for work already completed or for goods that are already sold and delivered. As the work is completed or the goods already delivered, the invoice/s are considered to be a financial asset of the business owners company which can be used as security to generate working capital instantly by using factoring.

This type of finance can sometimes be called debtor finance or invoice factoring.

Factoring Helps Business Grow and Expand

Factoring Helps Business Grow and Expand

Factoring companies provide funding to the business owner based on a different fee structures that are generally unique to that factor and there is not general or across the board standard fee charged by all Factors.

Invoice Factoring or Debtor Finance is commonly used in businesses where the payment terms on their sales invoices are longer that the payment requirements of their suppliers.

For instance wages might need to be paid each week or every second week and rent every week or every month, but customers might only pay 30 days after the end of the month where the sale occurs. If the customer is a large business the payments terms as often even longer.

Debtor Finance Matches Working Capitla with Business GrowthFactoring is better than the loan because it meets or matches the immediate working capital needs of the business and its obligations.

The selling of the account receivables shifts the legal ownership of the receivables to the Factor, so the Factor becomes the proper holder of the rights to the receivables.

The credibility and background check of the debtor is reviewed thoroughly by the Factor to ensure the reliability of getting the payment on time.

Growing businesses and owner of businesses where their sales terms are longer than their supplier terms should seriously consider invoice factoring or debtor finance to grow their business.  Invoice Factoring for Business Growth

Without a Factor Providing Invoice Finance to Support them this Construction Company was Out of Business

BackgroundBusiness cashflow solutions for tradesmen
A privately owned business that specialised in office and commercial fit-outs had been trading successfully for some years, and was already using debtor finance provided through another factoring company.
Their existing “factor” was unable to continue providing finance to the company due to a change in their own internal circumstances. They referred their client to Nova Business Finance.

 

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Solution

Nova received the application and within 24 Hours was able to offer the new client a factoring facility that provided finance against the unpaid sales invoices.
The facility was relatively comparable to what they had enjoyed with their previous factor, however because Nova Business Finance has a more flexible approach to funding SMEs, it was able to provide a suitable solution for financing the new clients invoices.

 

Result

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The facility was able to be settled within 48 hours of receiving all the completed paperwork back from the new client. The previous financier was paid in full and was happy to see his former client looked after properly and professionally.
The debtor finance facility provided to the new client enables the client to take on new and larger jobs with confidence, knowing that by using their invoices as security for funding for their SME, they will be able to fund their expansion as they grow.
Without some form of receivables finance the clients business would have been unable to grow.

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