Invoice factoring is a type of debtor financing that improves the cash flow of labour hire companies and recruitment agencies. It finances your accounts receivable ledger, bridging the gap between invoicing your client and receiving payment.
Commercial Capital LLC has over a decade of experience financing small companies in Australia. We are a leading provider of invoice factoring to labour hire companies and recruitment agencies. Our programmes have simple qualification requirements and can be deployed quickly.
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Do you face this challenge?
Most labour hire companies and recruitment agencies give their clients 30 to 60 days to pay their invoices. Trading on 30-day terms is typical in business transactions and is expected by your customers. However, these terms can create problems for companies with small cash reserves.
Trading on terms creates a 30-day gap, or longer, between sending the invoice and getting paid. Any expenses that must be paid during this period must come from your cash reserves. These include employee wages, entitlements, taxes, superannuation, and other expenses. This situation becomes a problem if these expenses exceed your reserves.
Invoice factoring solves this problem by financing your accounts receivable. This provides the funds you need to pay expenses and grow the business. When used correctly, invoice factoring provides a stable platform for growth.
How does invoice factoring work?
Your invoices are financed in two instalments. The first instalment is deposited into your account soon after it’s processed by the debtor financing company. This instalment covers 80% – 85% of the invoice’s value.
The financing company deposits the remaining 15% – 20% once your customer pays the invoice on their usual trading terms. This deposit concludes the transaction for the invoice. Financing fees are deducted directly from the instalments. Fees vary based on the size and risk of the transaction.
A high initial instalment is essential for labour hire companies and recruitment agencies. This deposit provides the initial liquidity injection that improves cash flow and helps cover expenses.
Commercial Capital LLC offers high advances. They range from 80% – 85% based on transaction details and risk.
An invoice factoring programme offers several for small and growing companies. These include:
- Improves cash flow quickly
- Provides funds for essential expenses
- 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
Qualifying for invoice factoring is simpler than obtaining other solutions of comparable size. The most important requirements include:
- 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?
An invoice factoring programme will likely help you if your company:
- Works with quality commercial clients
- Has good profit margins
- Has cash flow issue due to slow payments
However, every company’s situation is unique. The management and finance team should carefully evaluate if invoice factoring is right for the company.
We want to help you make an informed decision about using invoice factoring for your labour hire company or recruitment agency. Our learning center has detailed information about our products and how they work. Popular articles include:
- What is invoice factoring?
- Factoring v. Overdrafts
- Understanding invoice factoring costs
- How to choose a debtor financing company
We provide debtor financing and invoice factoring services to companies throughout Australia, including: