Factoring and Invoice Discounting, or Debtor Financing as it is commonly known, is experiencing major growth in Australia and for good reason.  It is a financial tool being used by many astute business owners to assist their business growth.  

Over the past few years, a number of new products have been released into the market and are finding favour with various business borrowers.   These business borrowers have found that they are able to take advantage of the benefits being offered by these new products to rapidly grow their respective businesses.

Factoring allows you to borrow up to 80% of the amount of invoices that you may raise.  Most Factoring companies will pay you the proceeds within 48 hours of receiving your funding request, without the requirement of real estate security.

There are no restrictions on how you can use the proceeds. Our clients have used this financial tool for the following purposes:

• take advantage of supplier discounts;
• expand their businesses;
• payoff or reduce their residential mortgages;
• buy out a business.

Factoring is a great source of funding for Start Up and High Growth Businesses that often struggle to attain traditional funding due to a lack of real estate security and trading history. It is also a possible funding alternative for businesses in a turnaround situation that are experiencing difficulties in sourcing funding from traditional sources.

There are various features and intricacies associated with the various facilities available on the market. The pricing of a facility will be very dependent on which features you decide to incorporate into your package.

The range of features provided also varies significantly amongst the various lenders. Negotiating and advising our clients on numerous funding transactions has provided us with a thorough knowledge of what is fair and reasonable within the market and which lender in the market is likely to be best suited to meet your needs.

Even if you already have a facility in place, there may be some substantially cheaper options available to you in the market.

Some more benefits of Factoring are:

• Reduces the need to offer costly early settlement discounts in order to get your clients to pay their accounts;
• Funding that grows with your business;
• Release the family home which has been used to secure business funding;
• Improve your purchasing power;
• Ability to reduce administration costs and free up management to concentrate on expanding business.

What is the difference between Factoring and Invoice Discounting?

Factoring differs from Invoice discounting in that the lender assumes responsibility for collecting the accounts that they have advanced funds against. With Invoice discounting, you will retain the responsibility and administration requirements of collecting your accounts and remitting the proceeds back to the lender.

If you think that Factoring may be a suitable tool to assist in the growth of your business, or you would just like to know a little more about how you could implement this financial tool in your business, feel free to contact one of our consultants.