Invoice factoring is a type of debtor financing that enables small businesses to finance their invoices. It bridges the financial gap between raising an invoice and receiving a payment from the client. This improves your company’s cash flow and provides funds to pay essential business expenses.
Invoice factoring is available to small companies and has simple qualification criteria. When used strategically, it can provide predictable cash flow and a platform for growth.
Please submit an online enquiry for more information and to schedule a call.
Do your clients pay on 30-day trading terms?
Small companies often have to offer 30-day trading terms to their business clients. Most larger companies expect to receive terms and often demand them as a condition of doing business with you.
Offering trading terms can create cash flow problems for businesses with limited cash reserves. The business may not have sufficient funds to cover expenses while waiting for invoice payments.
These cash flow problems usually increase for companies that are growing quickly. This situation may seem counterintuitive. However, growth frequently involves escalating expenditures before generating greater income.
How does invoice factoring work?
Invoice factoring solves this cash flow problem by financing your accounts receivable. It provides immediate funds that you can use to pay for expenses or to make new investments.
Transactions are usually financed in two instalments. The first instalment is advanced and deposited into your account once the finance company processes the invoice. It covers 80% – 85% of the invoice.
The remaining 15% – 20% is advanced into your account once your customer pays their invoice on their usual trading terms. Financing fees are deducted from the advances based on your agreed terms with the finance company.
An invoice factoring line can benefit your business in many ways. The financing line:
- Improves cash flow quickly
- Enables you to offer 30-day trading terms
- Is available to small businesses
- Can be deployed quickly
- Has simple qualification requirements
- Has fewer covenants than loans
High factoring advances
A high initial instalment is an essential feature of a factoring plan. This advance is what provides the initial cash flow to support your business.
Commercial Capital can provide high advances. Advances range from 80% to 85% and vary depending on your industry, your experience, and the credit profile of your clients.
We offer competitive rates. Specific term details are based on the transaction risk, invoice quality, and other parameters.
For immediate information, please submit an enquiry form.
Qualifying for invoice factoring is simpler than obtaining other solutions of comparable size. These are some of the most important requirements:
- ABN or ACN
- Creditworthy customers
- Offer 30 to 60-day trading terms
- Invoice after work is completed
- Unencumbered invoices
Is invoice factoring right for you?
Each company’s situation is unique. Consequently, these decisions must be made by the management and finance teams. Factoring will typically help a business if your company:
- Works with quality commercial clients
- Has good profit margins
- Has cash flow issue due to slow payments
Invoice factoring can be used by companies in most industries. The most important requirement is working with quality business clients on 30- to 60-day trading terms. Factoring is popular in many industries, including:
- Low rates: Competitive rates for qualifying clients
- High advances: As high as 85% for certain industries
- Flexible lines: Based on your actual needs and projected growth
- Easy qualification: Simple requirements and easy paperwork
- Fast setup: Accounts can be set up quickly
- Quick funding: Funds deployed quickly
We want to help you make an educated decision about using our services. Our learning centre has several articles with detailed information about our products. Popular articles include:
We provide debtor financing and invoice factoring services to companies throughout Australia, including: