Invoice finance, also known as accounts receivable financing, is a funding solution for businesses that allows them to free up cash tied up in unpaid invoices. Instead of waiting for customers to pay, businesses can sell their outstanding invoices to a finance company and receive a percentage of the invoice amount upfront. This can improve cash flow, provide working capital, and enable businesses to continue their operations without cash flow disruption. There are two main types of invoice financing: factoring and discounting. Factoring involves a finance company taking over your sales ledger and collecting payments directly from your customers. Invoice discounting, on the other hand, allows you to maintain control of your sales ledger and you collect the payments yourself.
Here's what a invoice finance typically looks like:
Borrow from $2,000 - $2,000,000Loan terms from 3 months to 5 yearsWeekly, fortnightly or monthly repaymentsFixed interest rates from 7.99%Interest rate tailored to your situationInvoice finance can be used for several purposes including improving cash flow, funding growth initiatives, managing seasonal fluctuations, or even to meet urgent cash needs. It can provide working capital for businesses by releasing cash tied up in unpaid invoices, thus helping them continue their operations smoothly. Businesses may use the funds to pay suppliers, manage payroll, invest in new resources, or any other operational expenses.
Here are some common reasons people take out a invoice finance:
Invoice finance is often used to enhance a business's cash flow, providing access to funds tied up in unpaid invoices.
Businesses may use invoice finance to fund expansion, such as opening new locations or entering new markets.
Businesses can use the funds from invoice finance to purchase inventory, ensuring they can meet customer demand.
Invoice finance can be used to pay suppliers promptly, helping to maintain good relationships and possibly qualifying the business for early payment discounts.
Invoice finance can provide the capital needed to invest in new equipment or technology, enhancing productivity or expanding services.
Businesses with seasonal sales patterns often use invoice finance to manage cash flow during slow periods.
The immediate access to cash from invoice finance can be used to hire additional staff for business growth.
Invoice finance can provide a safety net for managing unexpected expenses or financial emergencies.
Businesses might use invoice financing to consolidate other higher-interest debt into one manageable payment.
The funds from invoice finance can be invested into marketing and advertising efforts to increase sales and customer reach.
Calculate your repayment estimates and more.
The amount you can borrow with invoice financing in Australia will primarily depend on the value of your outstanding invoices. Invoice financing, also known as invoice factoring or accounts receivable financing, is a method of borrowing money based on the amounts due from your customers. Typically, lenders in Australia will advance you up to 80-90% of the total value of your outstanding invoices. So, if you have $100,000 in unpaid invoices, you could potentially receive an advance of $80,000 to $90,000. Once the invoices are paid, the lender will give you the remaining balance, less fees and interest.
This means that the borrowing capacity is linked directly to your sales. As your business grows and the amount in unpaid invoices increases, so too does your ability to borrow against those invoices. The exact amount you can borrow will also depend on the creditworthiness of your customers, since they are the ones who will ultimately be paying the invoices. If your customers have a strong track record of paying on time, you may be able to borrow more. As with any form of business finance, it's important to carefully consider the costs and benefits of invoice financing and to only borrow what you can afford to repay.
To estimate your monthly repayments and the total cost of the loan, input the loan amount, loan term and interest rate into the calculator below. This helps you plan your budget and choose the most suitable loan terms.
Lenders consider several factors when assessing your eligibility, including your credit score, income, debt-to-income ratio, age, residency, and required documentation. While meeting the eligibility criteria doesn't guarantee loan approval, having a good credit score, stable income, and a positive financial profile significantly improve your chances.
You are eligible to apply for a invoice finance if you are:
Over the age of 18; andAn Australian citizen or permanent resident; andHave a regular source of income, that is enough to meet the repaymentsApplying for a invoice finance is easy and only takes a few minutes. Get started by filling out some basic information into our application form. We’ll review your information, and someone will be in contact with you to discuss the best option for you from over 40+ Australian lenders.
If you’re eligible for a invoice finance, and you are happy with the initial quote, you will need to prepare documents such as:
Passport or drivers licenceProof of income and expenses (e.g. payslips, bank statements)Details of any current debts or other loansCompare over 40+ lenders with one application.
When searching for a invoice finance, it's essential to understand the different factors to find the best fit for your needs. From interest rates and fees to loan terms and early payout options, each factor can increase or descrease the total amount you will repay.
When it comes to obtaining a invoice finance, one of the most critical factors to consider is the interest rate. The interest rate directly impacts the cost of borrowing and your monthly repayment amount. It is essential to compare interest rates from different lenders to ensure you secure a competitive rate that aligns with your financial goals and helps you save on interest expenses over the loan term. Keep in mind that interest rates can vary based on factors such as your creditworthiness, the type of loan, and the lender's assessment of risk.
In addition to the interest rate, carefully evaluating the fees associated with invoice finance is crucial. These fees may include application fees, origination fees, processing fees, and ongoing maintenance fees. By understanding the fee structure of different lenders, you can choose a loan with transparent and reasonable fees. It's important to consider both the interest rate and fees to determine the overall cost of the loan and ensure you minimize costs throughout the loan term.
When comparing invoice finance options, looking beyond the interest rate alone is essential. The comparison rate provides a more comprehensive understanding of the true cost of the loan. It takes into account both the interest rate and any additional fees associated with the loan, providing a single percentage figure. Comparing comparison rates from different lenders enables you to make a more informed decision by considering the total cost of borrowing. This ensures you have a clearer picture of the affordability of each loan option.
The loan term, or the duration of repayment, is a significant factor to consider when obtaining a invoice finance. It determines the length of time over which you will make repayments. Shorter loan terms usually result in higher monthly payments but lower overall interest costs, as the loan will be paid off in a shorter timeframe. Longer loan terms may offer lower monthly payments but could result in higher interest expenses over the life of the loan. It's crucial to evaluate your business's cash flow and financial goals to determine the loan term that suits your specific needs.
Flexibility in loan repayment is a valuable feature to consider when seeking a invoice finance. Early payout options allow you to repay the loan before the agreed-upon term without incurring any penalties or additional charges. This flexibility can be advantageous if your business experiences increased cash flow or you wish to reduce interest expenses. Before finalizing a invoice finance, review the terms and conditions to ensure that early repayment is possible and to understand any potential limitations or conditions that may apply.
Flexibility in loan repayment is a valuable feature to consider when seeking a invoice finance. Early payout options allow you to repay the loan before the agreed-upon term without incurring any penalties or additional charges. This flexibility can be advantageous if your business experiences increased cash flow or you wish to reduce interest expenses. Before finalizing a invoice finance, review the terms and conditions to ensure that early repayment is possible and to understand any potential limitations or conditions that may apply.
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