Factoring or Invoice Financing – Can I use it?

To start with they are the same thing, basically (they are also called Debtor Finance or Discounting). Firstly, this sort of financing is only available for certain industries and businesses. The client who you invoice, must be another business, not retail; your payment cannot be staged or performance based, like builders or contractors.

The facility ideally works for businesses such as:

  • Labour hire
  • Crash repairs
  • Quarries
  • Distribution
  • Wholesale fashion
  • Manufacturing
  • Wholesale
  • Business services
  • Transport
  • Printing

Secondly, the facility operates like a line of credit secured against your invoices. There are lots of different options in regards to lenders and products.

These products are particularly useful for Growing businesses – accelerating cash receipts from debtors assists businesses with ongoing (and growing) working capital commitments. Often businesses in a growth cycle do not have sufficient cash flow funding facilities to accommodate the growing commitments required to increase sales. Debtor Finance offers a growing facility in line with the sales growth of the business. More Debtors = More Cash.

As a means of Risk Protection – Many small / medium sized businesses who trade with a cash gap fund their working capital with bank facilities secured by personal assets. It is highly usual for businesses to use a bank overdraft that is secured by the owner’s home. Risk protection is an important strategy for personal wealth creation and peace of mind. Funding the business by leveraging the business assets allows personal assets to be kept separate and safe from the business commitments. Standard Debtor Finance facilities do not require real estate security.

To assist with your personal/family Financial Planning – Not only does removing the personal real estate from securing business finance facilities add risk protection (an important financial planning strategy) but alleviates the equity in the property to be utilised proactively for wealth creation strategies.

Debtor Finance helps create equity for these purposes.

If you are looking to grow your business by way of Acquisitions – Leveraging assets to raise funds for acquisition purposes is a very important component. Debtor Finance offers maximum leverage against assets. Up to 90% can be advanced against debtors with standard facilities which offers greater leveraging opportunities. More access to cash through Debtor Finance allows for a more efficient use of equity in acquisition transactions.

Should you be interested in obtaining any further information please contact our office to discuss.

 

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