Best Invoice Finance Solutions in Australia

What is Invoice Financing?

Invoice Financing is a facility that allows businesses to borrow money against the raised invoices yet to be paid by customers. It has become a very popular mode of financing to help businesses cover the gap of slow payments from debtors in the last few years.

Under invoice finance facility, the business lender approves an invoice financing limit and the borrower can instantly get up to 95% of the unpaid approved invoices. Once when the actual payment of the invoice is received from the debtors, the advance received gets settled and balance is credited back net of charges. The interest is only charged on the borrowed sum for the outstanding period. This allows businesses to stay on top of businesses’ expenses and make growth decisions. This facility is also commonly known as “Invoice Discounting”.

What makes me eligible for Invoice Financing?

All the businesses may not be eligible for an invoice finance facility.

To be eligible

Business must have an active ABN or ACN
A business must have an outstanding invoice against other Australian business.
Proof of delivery required for invoices issued.

Our loan guide

Invoice Finance

Loan amount

$5k- $150M

Interest rates from

9.99% p.a.

Loan term

Ongoing

Pre-approval time

24 hours – 72 hours

Unconditional approval & settlement time

7-10 days

Repayments

Gets settled against payment of invoices within 60-90 days

Security

Secured against current assets of the business | No real estate security required

What you need to know

Can be used for

Buying stock/Inventory

Paying creditors

Other working capital needs

Documents required

Last 6-12 months bank statement.

Financial statements with Receivables/Payables ledger

Sample invoice with proof of delivery

ATO statements

A valid identification proof

Benefits

Get paid against invoices in advance

Can go higher funding without real estate security

Does not impact business leverage

*The information provided in critical information sheet is intended as a guide only. Please contact us for more information.

What you should know about Invoice Finance

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What are the pros and cons of Invoice Financing?

Pros

Helps to cover the gap of slow payments.

Invoice finance limits are secured against the invoice, so no additional security is required.

Generally, you can get higher limits without any additional security which is not possible with an unsecured business loan

With an invoice finance limit, you only need to pay interest for what you have utilised (like a business line of credit).

You save interest if the invoice is paid early.

An invoice finance limit gives the flexibility to use the funds whenever needed.

Invoice finance is an off the balance sheet funding option, so it does not impact on the health of the financial statements.

Cons

Generally, an invoice finance facility takes a longer time to get approved.

You will have to present an invoice with proof of delivery to get an invoice financed every time.

What documents are required to apply for an Invoice Finance Limit?

Generally, a detailed assessment is done before approving an invoice finance limit and would require the following documents.

Last 6-12 months bank statement.
Financial statements with Receivables/Payables ledger
Sample invoice with proof of delivery
ATO statements
A valid identification proof

What are disclosed and undisclosed invoice finance facility?

Disclosed

You can get funded up to 95% of the invoice.
The debtor is aware of the invoice finance facility arrangement with your lender.
An establishment letter is sent to the customer advising them of change in banking details due to arrangement of the invoice financing solution for your business growth
The lender may contact the customer from time to time to get a confirmation on the status of repayment.
A notice of assignment is issues by the lender to your debtor advising that the payment now needs to be done to the lender as the invoice has been assigned to

Undisclosed/ Confidential

You can get funded up to 95% of the invoice
The debtor is not aware of the invoice finance facility arrangement with your lender.
A change of banking facility is advised to the customer but the reason for the same is not disclosed.
No contact is made by the lender to your customer. However, in case of significant delays, the lender may seek you approval and assistance to call the debtor and understand reason for delays.
No notice of assignment is issued for a confidential facility.

Invoice Financing versus Invoice Factoring

We have provided a table below outline the differences between the two to help you choose the product best suited for your business.

Invoice Financing (Invoice Discounting)

Invoices are not sold to the lender.
Risk default from debtors remains with the business.
Receive advance payment up to 95% of the invoice value.
Lower interest compared to Invoice Factoring.

Invoice Factoring

Invoices are sold to the factoring company in exchange for upfront payment.
Risk default from debtors is passed onto the invoice factoring company.
Receive advance payment up to 80% or lower of the invoice value
Higher interest compared to Invoice Financing.

What are the differences between Invoice Finance and Debtor Finance?

Although Debtor Financing may look very similar to Invoice Financing on a fundamental level, there are differences you should know before choosing one. The major difference is the component that determines the limits of the funds.

Invoice Finance

Limits are determined based on monthly invoice activity.
Need to submit an invoice every time to get financed against it
Need to submit proof of delivery along with the invoice
Generally, invoices with progressive payments are not considered by the lenders.

Debtor Finance

Limits are determined basis the receivables ledger.
Need to submit receivables ledger periodically
Do not need to submit proof of delivery.
Generally, debtors aging <90 days are only funded.

How do I apply for Invoice Financing?

In past, many businesses considered an invoice finance facility as a complex funding option and shied away from exploring the potential high funding possibility without the need of pledging a real estate security. However, with advancement and technology and digitalization of bookkeeping and accounting services, invoice finance facility has become one of the easiest ways to unlock cash flow of your business in advance. Once your business is approved an Invoice finance limit, you need to follow the following 4 steps to get the funding which can be completed within 2-4 hours:

Upload your issued invoice with a proof of delivery

Once the invoice is verified and approved, the lender pays you up to 95% of the invoice

When your debtor pays the invoice, the balance of invoice will be paid to you net of charges.

The transaction is completed. You can re-use the limit.

Invoice Financing versus Invoice Factoring

You may have heard of multiple financing products that are related to invoices. The popular Invoice associated financing products include Invoice Financing (Invoice Discounting) and Invoice Factoring. Although they may sound similar, there are fundamental differences between them. We have provided a table below outline the differences between the two to help you choose the product best suited for your business.

Start loan application

Invoice Financing (Invoice Discounting)

Invoices are not sold to the lender.

Risk default from debtors remains with the business.

Receive advance payment up to 95% of the invoice value.

Lower interest compared to Invoice Factoring.

Invoice Factoring

Invoices are sold to the factoring company in exchange for upfront payment.

Risk default from debtors is passed onto the invoice factoring company.

Receive advance payment up to 80% or lower of the invoice value

Higher interest compared to Invoice Financing.

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Frequently asked questions

Applying for Invoice Financing is similar to applying for other business loans. You need to enter some basic details regarding your business and submit documents as required. However, you need to carefully pick the lender who can meet your business financing requirements, are ready to use your invoices as a security, and can offer competitive pricing. We, at Broc Finance can help you with that, you can simply apply through our website or send us a message to contact you or simply give us a call on 1300 253 041 to talk to one of our lending specialists.

An invoice finance limit works similarly to a business line of credit. Here, the lender approves an invoice finance limit for your business based on your monthly invoice activity. To withdraw funds, you need to provide/upload an invoice on the lender’s portal. You would be able to withdraw between up to 95% of the invoice amount. Once the debtor pays the invoice, your outstanding debt will be settled against the money received, and the balance would be transferred back to you after deducting the interest cost/charges for that period.

An invoice finance facility is not a feasible product for every business. For instance, if you have a retail coffee shop, you may not be eligible, as you would hardly raise an invoice on your customers as all your revenue would be driven through cash or POS. To be eligible for an invoice finance limit, your business should have regular invoice activity. An invoice finance facility is ideal for businesses where the credit period is generally higher.

An invoice finance limit may have one or a combination of the following costs:

Interest cost: Interest charged on the funds drawn against the invoice for the period it remains outstanding.

Line fees: There could be a small monthly/annual fee charged by the lenders for facilitating you an invoice finance limit throughout the term of the loan irrespective of your utilisation.

Invoice Processing Fees: Instead of a line fee, some lenders may charge a one-off invoice processing fee on each invoice financed throughout the term of the limit. Some lenders may give you an interest-free period of 60-90 days for a slightly higher invoice processing fee.

Please feel free to reach out to us on 1300 253 041 or send us a message in case you wish to know more.

Most of the lenders provide you an option to get either all (full ledger) or a selective number of invoices financed (partial ledger). Generally, the following invoices qualify for funding:

Invoices raised to other businesses on standard trade credit terms can be considered for funding. Invoices to private individuals are not suitable
Invoices less than 90 days old can be eligible for funding. Invoices older than 90 days cannot be funded.
Invoices must relate to goods delivered and/or services fully completed.

The invoice funding limit is determined based on the monthly invoice activity of your business. Generally, lenders are open to provide a limit of up to 3 – 4 months of the invoices raised by your business.

Generally, you are not required to provide any additional property security. The funding is advanced against the invoices raised and the lenders would have to charge over the invoices.

Generally, an invoice finance limit is a less risky and more flexible product as compared to a normal unsecured business loan product and lenders can approve a higher limit which is not possible with an unsecured business loan or a normal business line of credit limit.

Generally, lenders can advance you between 70%-95% of the invoice value depending on the risks associated with your business.

A Debtor Finance limit may not always be the right option for your business as you may have a business wherein you do not have account receivables activities, or your business requires a smaller loan amount, and a simpler option would be more suitable. There are various alternative business loan options that we can help you with. Some of the popular options are secured business loans, unsecured business loans, business line of credit and vehicle and equipment finance facilities. Please reach out to us on 1300 253 041 or send us a message. One of our lending specialists would get in touch in no time to assist you.

At Broc Finance, we endeavour to get the most adequate facility suitable to the business requirements of our clients. In most of the cases logged in through us, we try to get an indicative offer from the lender for our client’s consideration before proceeding with formal application and consent to credit check. This approach helps our clients to avoid unwanted rejections and credit checks which can significantly impact their credit scores.

We would be happy to answer if you have any other questions. Please contact us.