Debtor and Cash Flow Finance for Australian SMEs
Reliable Debtor and Cash Flow Finance to Grow Your Business
Gain greater control of your business by eliminating cashflow problems
• Access up to 90% of money outstanding from your customer invoices within 24 hours
• Limit personal risk and exposure as there is no real estate security required
• Be matched with the right lender who understands your business and industry
If you own or operate a business, irrespective of the size, you will have faced cash flow problems that cause:
• Inability to fund daily operations
• Delay in payments to suppliers
• Harm to your professional reputation
While many owners approach traditional banks for funding, they are usually discouraged by:
• The amount of paperwork and time involved in processing the loan
• The bank’s limited knowledge of how their business and industry works
• The need for property or real estate as security for the loan
SMEs found it especially challenging to overcome these barriers. This resulted in more businesses seeking loans from non-traditional lenders who were able to design flexible solutions that actually suited their needs. This was the start of debtor finance.
What is Debtor Finance and How is it Different from Traditional Loans?
Also known as cashflow finance, debtor finance is a flexible line of credit secured by your outstanding invoices. When you have delivered goods or services to your customers, you forward the invoices to your financier. They then pay you within 24 hours up to 90% of the invoice amount.
For example, the financier will purchase your debts, verify your invoices and pay you up to 90% of the cash amount. Then, once your customer pays the invoice, you will receive the remaining amount minus the fees and charges.
This finance facility helps you streamline your cash flow to run your business smoothly.
What Types of Debtor or Cash Flow Finance Can I Obtain?
There are a number of ways in which this facility can be delivered. The two main ways are:1. Invoice Factoring: This is a disclosed facility i.e. your customers are made aware that the factoring company has responsibility for debt collection. Advantages:
• Debtors tend to pay factoring companies quickly as they want to protect their credit rating.
• This is a full service solution that takes care of debt collection, administration and reporting.
When you obtain of this facility, you must remember that your factoring company will represent your business to your debtors. This makes it important to engage the services of a trusted financier who will handle your brand and your customers with care.
2. Invoice Discounting: This is confidential financing i.e. your customers are unaware of your finance facility. As long as the account is managed well, only you and your financier will be aware of this arrangement.
• Your business remains in control of dealing with customers and debt collection.
• You can make short-term loans by using unpaid debts as security.
This type of debtor financing is most suitable for those who have an in-house team that can efficiently manage payment collections and credit management.
What are the Benefits of Debtor Finance?Eliminating cash flow problem is just one of the many benefits. Others include:
• As your sales grow, the facility limit grows with it. This helps you manage the increased costs of your growing company.
• Your funds are available to you within 24 hours, once your invoices are verified.
• You can retain business equity and eliminate the need for repayment with capital.
• You can obtain of bulk-buying rates and early-payment discounts from your suppliers.
• You can avoid financial bottlenecks in your daily operations and take advantage of market opportunities with more agility.
What are the Fees and Charges
When your invoices are funded, you can receive up to 80 - 90% of your verified invoice amount. The remaining amount is paid to you, less fees, once your customer pays the financier.
A reputable lender will be upfront about fees and charges. This enables you to account for the cost of finance in your books.
Who is Eligible for Debtor Finance?
If your business provides goods and services to your customers on credit terms, then you are eligible.
According to the Debtor and Invoice Finance Association of Australia and New Zealand (DIFA), the amount of debt purchased in the December 2015 quarter was $17.4 billion. This showed an increase from 10.2% from the September 2015 quarter.
The growing popularity of cash flow finance is because it provides access to more funds as sales increase. This means that businesses don’t have to keep proving their suitability to the financier.
How can Bizsmart Finance Help?
When you deal with our experienced professionals, you can count on unbiased professional advice. We have a strong network of over 40 trusted lenders and in-depth knowledge of the cash flow finance facilities they offer. We take the time to understand your requirements before matching you to a lender that will help you achieve your business goals.
Want to focus your time on growing your business instead of chasing customers for payments?
At Bizsmart Finance, we can help you find a loan facility that works for you. Solve your cash flow problems with an easy, flexible solution that is designed to suit your needs. Contact our team to find out how we can help you today.