What is invoice financing?
Invoice financing (Debtor Financing) is a line of credit that provides funding based on outstanding invoices. Businesses can receive 80% of the value of invoices upfront which increases cash flow that can be used for operational costs or to invest in growth opportunities,
As invoice finance is supporting by outstanding invoices, the amount of available funding grows with your sales and can be used by early-stage, growing and established businesses across a wide range of industries.
What are the Pros and Cons of invoice financing?
- Immediate cash flow
- Ongoing access to finance
- Backed by invoices, not real estate
- High approval rates
- No regular fixed loan repayments
- Option to outsource collections
- Costs higher than real estate backed finance
What is the difference between Invoice Finance and Debtor Finance?
Nothing. Invoice Financing and Debtor Financing are different names for the same thing. It's also sometimes known as Accounts Receivable Financing.
What is Confidential Invoice Finance (Undisclosed Invoice Finance)?
Confidential Invoice Financing or Undisclosed Invoice Financing is when Earlypay provides funding of your invoices and your customers are not aware that there is a Debtor Factoring facility in place. Confidential invoice financing is generally offered to businesses with a strong track record.
What is Disclosed Invoice Finance?
Disclosed Invoice Finance is the arrangement where your customers are aware that Earlypay is financing your invoices. Disclosed arrangements generally involve Earlypay managing the collection of your invoices and we may contact your customers on your behalf to ensure they pay your invoices. This is a useful arrangement for businesses that have small finance teams or simply choose to outsource this function and focus on other areas of their business.
Disclosed invoice financing is increasingly common in Australia and although some business owners worry about their customers knowing that they use Debtor factoring, it is very rarely an issue. If you do prefer that the factoring arrangement remains confidential, please let your Earlypay representative know.
What is the difference between Invoice Factoring and Invoice Discounting?
Invoice Factoring and Invoice Discounting are the two types of Invoice Financing.
Invoice Factoring(Debtor Factoring) involves a business selling its invoices to the invoice factoring company in exchange for upfront payment for around 80%. When the invoice is paid, the finance with the factoring business is repaid and the balance, less any fees, becomes available to the business that sold/financed the invoice. Invoice factoring is generally disclosed to your customers and the financier can manage collections. Earlypay can however, offer confidential facilities to selected businesses.
Invoice Discounting is different to Invoice Factoring as the invoices are not sold to the invoice financing business but instead used as security for finance. A business can access funding of up to 80% of the value of its outstanding accounts receivable balance. Invoice Discounting is often confidential and the business retains control of invoice collections management making it better suited to larger and more established businesses.
What type of Invoice Financing is right for my business?
Invoice Financing(Debtor Financing) is a very flexible form of business finance that can be tailored to suit the needs of your business. In addition to unlocking cash from unpaid invoices, invoice finance can also include collections management services, allowing businesses to focus resources on other areas.
Invoice Financing is used by businesses across a wide range of industries including Wholesale trade, Transport, Manufacturing, Recruitment, Labour hire, Business services and many others.
Start-ups, Growing and Established businesses are all eligible for Invoice Finance and we’d love to hear from you even if you have a short trading history, less than perfect credit score or ATO debts.
Given the flexible nature of invoice finance, and the fact that every business is different, it's best to speak to our experienced team to design a solution that works best for you and your business.