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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
| Borrowing Limits | |
|---|---|
| Loan Amount | $5k- $150M |
| Term | Ongoing |
| Can be used for |
|
| Repayments | Gets settled against payment of invoices within 60-90 days |
| Security |
|
| Pre-Approval Time | 24 hours – 72 hours |
| Unconditional Approval and Settlement Time | 7-10 days |
| Documents required |
|
| Interest Rates | Starts from 9.99% p.a. |
| Benefits |
|
*The information provided in critical information sheet is intended as a guide only. Please contact us for more information
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.
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.
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.
Generally, a detailed assessment is done before approving an invoice finance limit and would require the following documents.
Check the basic loan eligibility of your business as mentioned above
Once you complete your application form. We get in touch to discuss your business requirements and advise the documents required.
Once we get all the documents required, we login your application with the most suited lender and get the loan approval
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:
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.
Contact us today and discover how our expertise can help your small business thrive.
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Broc Financial Services Pvt Ltd.
ACN 648 088 304
Credit Representative number 540795 is Authorised under Australian Credit Licence Number 389328