Why are businesses flocking to invoice finance?

November 24th, 2015

Imagine the scenario: your business is soaring. You're selling your products or services in droves, and the company looks like it could become highly profitable. It's the dream of any small business; though it does come with inherent drawbacks.

$15.8 billion in debtor finance turnover was made in the June 2015 quarter.

If your clients are slow to pay your invoices, you're unlikely to have the money you need to capitalise on your initial success. It leaves promising businesses stagnant, with poor cashflow and unable to fulfil their potential.

So they turn to their bank manager, and are told that they must wait for approval (which they may not get) and potentially put their personal belongings up as collateral, just in case. It's slow, it's stressful, and it doesn't work with your best interests in mind.

That's why more Australian businesses are flocking to invoice finance (also known as debtor finance) as a solution, shown in a new report from the Debtor and Invoice Finance Association (DIFA).

DIFA's most recent quarterly report found that $15.8 billion in debtor finance turnover was made in the June 2015 quarter - an increase of 6.4 per cent on the same period in 2014. In the 12 months previous to June, a staggering $63.9 billion had been financed in this way.

So, why are businesses turning to the finance solution in increasing numbers? Here are just three reasons:

Poor cashflow is a recurring issue for many small businesses.Poor cashflow is a recurring issue for many small businesses.

1) It's quick

If you're looking to grow quickly, though lacking the financial clout to do so, speaking to your debtor finance provider is typically a much quicker process than visiting your bank manager. In some cases, you can have funding within 24 hours, which is great if you have immediate payments to make, such as staff wages.

2) You're in control

An attractive part of invoice finance is that the provider will manage some of the accounting function and chase the payment for you. However, it's also a flexible solution, and your business is in charge of how much of the process you outsource.

3) It doesn't deepen your debt

It's important to remember that the word 'debt' in 'debtor finance' applies to your client, not you. Essentially, the process involves freeing up the money already owed to you, though tied up by slow payers. This means you're not racking up more debt, and instead, using the cash you've already worked for to help your business grow.

Do you have any more questions regarding invoice finance? Our team is on hand and ready to help out. Call us today on 1300 760 205 to speak to an expert.

If you'd like to learn how Earlypay's Invoice Finance & Equipment Finance can help you boost your working capital to fund growth or keep on top of day-to-day operations of your business, contact Earlypay's helpful team today on 1300 760 205, visit our sign-up form or contact [email protected].