There are some misconceptions around debtor finance from people who aren't quite sure how the solution works. Debtor finance (or invoice finance/factoring) involves a financer immediately paying off up to 80 per cent of a business's outstanding invoices, and then chasing the remainder. This provides immediate money to the company, helping them maintain a steady cashflow.
Simple, right? And yet the myths still put off some business owners. We aim to put three of them to bed once and for all.
1) It's for businesses that have fallen on hard times
As anyone will tell you, seeking finance is not a failure; it is more often than not a result of fast or impending growth. It's true that small to medium-sized enterprises (SMEs) often turn to the solution because, for them, cashflow is a priority.
Late payers can cripple the finances of any company, while debtor finance is helping thousands of Australian businesses grow.
2) I won't be approved
If you've been rejected for a bank loan, you may think all types of finance are beyond your reach. The very nature of invoice finance means the business is not digging a deeper hole of debt. There's minimal risk to both the applicant and debtor finance provider, so they can offer fast approval to ensure you get your cash as quickly as possible.
3) It impacts customer relations
One of the most damaging myths about debtor finance is that your clients will be concerned that you are struggling. As Accountants Daily put it: "Why should they?
"4,500 businesses in Australia use debtor finance ... Around the world, more than US$3 trillion of sales are handled and in the United Kingdom, 65,000 businesses use debtor finance," the publication said.
Do you have more concerns around debtor finance? Our experts are ready to take your call and explain exactly how the solution works.