What is Debt Factoring?
The term “Factoring receivables” is clear enough. Factoring is a transaction between two entities, where a lender or finance company buys the accounts receivables or debt from another company. Debt factoring is a form of business financing which enables enterprises to control their cash flow and get instant access to funding by leveraging the accounts receivables ledger as security or collateral. They sell and give access to their receivable ledger to a lender, and gain funding against it.
Not all companies or enterprises come with significant ownership of real estate assets, which can be used as security for business loans. It is applicable, especially to SMEs, new businesses, and start-ups. Business establishments like these can use their accounts receivables ledger as assets, turning a liability into an opportunity. They can use it as a security and get immediate financing enough to suffice the operational costs and accelerate business growth.
For more information, reach out to the experts at Broc Finance today! We will connect you with a trusted and vetted lender for factoring.
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Key Attributes of Debt Factoring
Factoring receivables financing comes with a unique set of attributes, setting it apart from the conventional forms of financing, such as secured and unsecured business loans. Unlike the traditional loans, this one has a simpler funding process wherein the lender outrightly buy out your account receivables ledger and make upfront discounted payments factoring the risks associated with the ledger. The other features are listed below:
- You can unlock up to 90% of the value of the receivables ledger within 24 hours of approval.
- The collection and bad debt risk is passed on to the lender by factoring receivables.
- Don’t need to put in any additional real estate security.
- Factoring is an essential alternative to conventional business financing, especially for businesses that have regular outstanding expenses like labour costs, raw material sourcing, etc. Debt factoring presents an opportunity to turn a problem into a financial solution to drive business continuity and growth.
- It allows businesses to avoid falling into the vortex of late payments to vendors.
- Factoring makes it easy to get approval for financing even with an average credit history, ATO debt, or short trading history.
It turns the debt or outstanding invoices into a great asset for the enterprise.
Which Businesses are Suitable for Debt Factoring?
According to an Australian Small Business and Family Enterprise Ombudsman survey, SMEs are the worst sufferers of pending invoices. 100% of the business owners who participated in the survey complained about late payments. More than half of the business owners claimed that 40% of their invoices were pending or paid late. It’s the reason why, many enterprises resort to factoring receivables, so that can fill in the financial gap.
Nevertheless, some businesses can benefit from compared to the rest, such as;
- SMEs are involved in transport and logistics, storage, wholesale trade, and manufacturing.
- Companies on recruitment and staffing spree.
- SMEs that are on a growth drive can benefit from factoring. These organizations require a constant flow of cash to maintain business continuity.
- Private limited companies, partnership firms, joint ventures, and individual traders can benefit from factoring too.
Not sure if you your business is eligible for factoring receivables financing? Contact us today for expert consultation.
How Broc Finance Can Help You?
In a short tenure, Broc Finance has helped Australian businesses, especially the SMEs to secure diverse financing options and facilitate the same via credible lenders. We have a robust network that comprises the top lenders in the country. Our accessibility to varied business loans makes it easy for businesses to get the kind of financing that’s best suited for them. The following approach makes us stand out from our competitors:
Personal Consultation: Unlike business loan marketplace websites which use AI based algorithms to match your requirements, we provide obligation free personal consultation as every business is different and an AI based algorithm may not provide them the optimum solution.
- Tailor made options: Being a small business owner, many of our clients are not sure of right loan product for their businesses. Our lending specialists understand their needs and recommend tailor made options.
- Clear Communication: We keep our clients well informed about the stepwise progress of their loan application through clear communication in a timely manner.
- Competitive Pricing: We endeavour to achieve the optimum business loan solution for our clients at the most competitive pricing possible.
Saroj was fantastic he was very assuring and was on the mark with every aspect of the application which made my experience stress free. I would definitely recommend my friends to Saroj. As my experience was smooth and quick.
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FAQ's About debt-factoring
A traditional bank loan demands the business owner to have a notable credit history and a real estate asset as collateral for the loan. In debt factoring, the lender considers the recent sales of the enterprise, and the pending invoices become the collateral. Unlike a traditional bank loan, you can get the funds within 24 hours of loan approval.
You can choose which invoices you want to hand over to the lender, offering debt factoring to you. We offer that flexibility to our clients.
The cost varies from one business to another. You can consult with our personnel to get a clear picture of the fees you will have to pay against the debt factoring service.
Once you factor in your receivables, the lender will have control over it, chasing and collecting the unpaid invoices. So, yes, your clients will know about the factoring receivables.