Beginners Guide to Factoring Financing

Business owners are happiest when they get paid by their debtors and they dread waiting for payments. The wait for payments costs business owner’s opportunities since the wait starves business owners of the much-needed cash.

How Factoring Finance Australia Works

Factoring finance Australia helps business owners to ease the pain of waiting for payments from debtors. Factoring finance Australia works by enabling companies sell their invoices to factors for the sums that are outstanding at a particular time. Factoring finance Australia does not take as much time since it does not have a lengthy application process like it would with a bank loan. The factor earns a fee when the debtor pays up.


The main benefits of factoring finance Australia are:

  1. As a business, you will free yourself of short term financial constraints that may arise due to cash being held by debtors.
  2. The business can continue running normally without being held down by trade receivables. It, therefore, acts as a good bridge financing option.
  3. Factoring finance Australia provides money upfront for the business to continue its operations without hitches. The funds can be used to fund the growth of the business.


Guide to start factoring finance Australia

Factoring finance Australia is certainly a good option to have in your business to access short term cash. As a beginner, you should consider the following factors:

  1. Companies offering factoring finance Australia. There are many companies offering to factor and you are better off looking at the ones in your local area as they are better placed to understand your business and also know your debtors.
  2. Cost. Factoring finance Australia comes at a cost to your company. The cost depends on the duration it will take for the debtors to pay the invoices to the factor. You should read between the fine print to determine whether your company has the ability to meet those costs.
  3. Duration. The duration of factoring finance Australia otherwise the credit period varies between debtors. The longer the duration the more the cost due to the time value of money concept. Therefore, you are better placed to offer invoices that are likely to be paid within the shortest time to lower your factoring finance Australia’s costs.
  4. Terms and conditions. There are other conditions that a factor may have and you should understand them very well. For instance, how to solve disputes should they arise and any other legal issues that may exist.


In conclusion, factoring finance Australia is a viable option for short term financing for your business.




What is Factoring and When to Use It As A Contractor

Factoring is a type of finance where a company sells its account invoices to another company at a discount. Companies opt for this form of financing whenever they experience cash flow problems due to the failure of clients to pay on time for the goods delivered or services rendered. In the case of a contractor, this means that if you complete a job for a client but they do not pay you for this service for over 30 days, you can get a cash advance on this invoice so that you can continue to take other jobs and grow your business.

Each time the seller sends an invoice to his customer, the factoring company pays the seller at least 70 percent of the invoice value within 24 hours. The remaining amount will be paid once the customer has paid the invoice in full. In this case, the customer does not make the payment to the seller but the factoring company.

Invoice factoring is one of the forms of financing that allows you to grow your business over time without the involvement of complex credit committees or time limits. As a contractor as long as you continue to provide quality services to creditworthy companies, a factoring company can finance your business against eligible invoices within the shortest time possible.

There are several other services that factoring companies can provide to contractors. This includes providing well-detailed reports because many businesses lack a qualified in house bookkeeper who can compile transactions in an accurate and timely manner which allows business owners to adequately assess their business growth. Additionally, factoring companies can guarantee their customers credit protection against non-payment resulting from customer failure to make payments promptly or when a customer is unable to pay for the goods delivered or services rendered. Most businesses are unable to seek credit protection because of the high premiums it comes with. These credit protection services are available to their clients at reasonable rates.

Overall, contractors can sit and relax, knowing that there is cash in the account to cater for salaries and other expenses. It is understandable why invoice factoring is becoming more popular amongst business owners looking to expand their businesses but have access to limited capital, especially when other sources of financing involve complex procedures that discourage business in their pursuant.