Small and midsize companies often have to wait 30 to 90 days to get paid by their clients. This situation can create cash flow problems for businesses that are growing quickly or have outgrown their financial reserves.
Commercial Capital is a leading provider of invoice factoring, a type of debtor financing. Invoice factoring can finance your slow-paying invoices and provide funds to pay for essential expenses. Our factoring solutions:
- Improve your cash flow
- Can be deployed quickly
- Have simple qualification criteria
- Are available to small businesses
Please submit an online enquiry for more information and to schedule a call.
Helps companies whose clients pay in 30 to 90 days. Factoring provides immediate cash flow to cover company expenses. Available to small businesses.
Helps subcontractors operating under the Security of Payments Act who need to finance progress claims. Provides funds to cover company expenses
How does debtor financing work?
Debtor financing is an umbrella term for solutions that improve a company’s cash flow by financing its accounts receivable ledger. The most common solution is invoice factoring. It offers the most flexibility and has simplest qualification criteria. Invoice factoring is typically used by small and midsized companies.
Most invoice factoring programs finance your accounts receivable ledger in two instalments. The first instalment covers 80% – 85% of the value of your invoices. The remaining 15% – 20% is deposited into your account once the invoice is paid in full.
The finance company’s fees are deducted from the instalments. How and when the fees are deducted depends on the specific structure for your transaction.
Our invoice factoring programmes have several advantages over other solutions, including:
- Improves your cash flow
- Offer 30 to 60 days trading terms to clients
- Grows with your sales
- No real estate security is required
- Fewer collateral requirements than other solutions
- Easy qualification process
- Quick deployment
- Helps minimise your bad debt
Qualifying for invoice factoring is simpler than obtaining other solutions. These are some of the most important requirements:
- ABN or ACN
- Creditworthy customers
- Invoice after work is completed
- Unencumbered invoices
Invoice factoring can be used by companies in most industries. The main requirements are having high-quality invoices and engaging in business-to-business trade. Typical clients include companies in the following industries:
1. Labour hire
4. Business services
Overdrafts vs. debtor finance
Small companies often try to handle temporary cash flow problems with an overdraft facility. The facility enables them to handle expenses while waiting for clients to pay their invoices.
However, overdraft facilities have some limitations. They can be inflexible, have a hard limit, and often must be secured by property. These limitations create a problem for some business owners.
Debtor financing solutions like invoice factoring can work better in many situations. They can be more flexible because the limit is tied to the credit quality of your sales ledger. Consequently, the line can accommodate growth. They also have simple qualification requirements and can be deployed quickly.
Read “Overdrafts v. Debtor Finance” to learn more.
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