Invoice Finance/Debtor Finance

What is Invoice Finance?

Invoice or debtor finance is a finance system that allows companies to convert their outstanding invoices (debtors) into cash via a loan. It’s a very efficient way to convert unpaid invoices into cash which in turn allows you to pay bills and can be used to grow your business.

How does Invoice Finance work?

The incoming bank (or you existing bank) would purchase the outstanding invoices and provide up to 80% of the value of those invoices as a loan. It is then expected that you would maintain your relationship with those debtors and receive payments for those invoices in a regular fashion. When your customers pay the invoices, they do so to a lender nominated account. The bank then keeps the 80% (or lending margin approved if lower) as payment for the finance and the remaining 20% is then paid into your normal operating account.

How do I know if I need Invoice Finance?

A typical list of business needs that are addressed with invoice finance are:

  • Growing businesses with increasing sales and debtors
  • Seasonal businesses with fluctuating finance requirements
  • Businesses that require additional funding but have limited or now capital (property) that can be offered as security under a normal commercial loan structure
  • Businesses looking to take advantage of early payment discounts with their suppliers
  • Businesses looking to purchase another business
  • Businesses who continually get near to their credit limit on an overdraft account

Typical industries that are suited to invoice finance would include:

  • Wholesalers
  • Importers
  • Transport and Logistics companies
  • Agricultural businesses
  • Mining companies
  • Manufacturers
  • Distributors
  • Printing and design companies
  • Other business services companies such as advertising, recruitment, publishing and consulting firms

What are some other benefits?

Some additional benefits that come with invoice finance are:

  • Quick access to funds: this allows your business to have fast access to working capital without waiting for invoices to be paid
  • Flexible line of credit: unlike other forms of finance, invoice financing is offered based on your customer’s outstanding invoices. Essentially, as your sales grow so does the limit of your facility
  • Very cost effective: You choose how much you wish to draw down, fees are normally paid on outstanding balances only.
  • Flexible security options: Unlike conventional business facilities, invoice financing doesn’t require the use of residential or commercial property to secure the loan.
  • Potential improved profitability: Because you can access funds quicker, there is no need for you to offer discounts to your customers to pay their invoices sooner.

Contact us if you have any further questions or to see if you qualify for invoice finance.