Why Invoice Financing Is Better Than a Business Loan
As an Australian business owner, you could turn to the banks or various Fintech business loan providers for your short-term financing needs. Either way did you know there is another viable option to solve your cash flow issues?
It’s called Invoice financing and it provides an invaluable support mechanism for growing businesses. Minor cash flow fluctuations could put a small growing businesses in a precarious working capital position if they don’t have short-term financing options on hand, and invoice factoring is a clever way for SME’s to give themselves an advance on outstanding invoices when they need to either pay suppliers, approvals on their working capital or simply quickly cover unexpected costs like quarterly ATO BAS. Invoice Financing is becoming more mainstream due to its absolute flexibility and many business owners are choosing it over bank loans and Fintech loans, most of which say they’ll never go back or consider another alternative.
What’s wrong with a Business Loan?
A business loan comes with a minimum fixed period; it has fixed interest charges, that are debited from your account on a weekly or monthly basis, plus a minimum repayment term.
A business loan or line of credit as its sometimes referred to, is debt on your balance sheet, invoice finance is not debt therefore there are no repayments and no interest is payable. You simply agree to a discount rate off the value of the invoice/s that you offer to fund. It is exactly the same as you offering your customers an early settlement discount for paying their invoices upfront.
Invoice discounting provides highly flexible funding for your business’ growth by giving immediate access to cash, against issued, but yet uncollected invoices with no fixed term.
You can draw down on these funds at any time and for any amount provided you have at least sufficient outstanding debtors for the amount you require.
As your debtor/s pay their invoices per your current payment terms with them, you are then able to repeat the process of re-drawing down the funds you require, over and over against new invoices that you have issued.
To illustrate, if a business has trading terms of 45 days, in effect the working capital cycle is limited to roughly 8 cycles/turns per year. By having a business loan this is not improved, whereas with invoice finance you are able to reduce your working capital cycle down to 30 days (or less) resulting in 12 cycles/turns per annum. This could result in as much as a 50% increase in revenue and profitability for a business over a year, without the need for a cash injection.
With flexible invoice finance from The Invoice Market (tim.) your business can offer up as little as one debtor all the way through to your full debtors ledger. There is no upfront application fee; no facility fee and no undrawn line fee, no locked-in minimum term contracts, so once approved your business will have immediate access to cash to pay its bills and grow. All this with no need to provide property as security.
When it comes to business funding, it’s clear that invoice financing offers more benefits over bank or business loans. It is easier to get it, quicker to access it, and there are less risks to use it, because fundamentally it is not a loan but a sale, you won’t accumulate any debt from taking it up. The amount of funding your business will receive is based on your current and future sales, not on your debt or balance sheet position.
If you would like to improve your cash flow by selling your invoices today, you will find it easier to do it with us, The Invoice Market (or tim.). At tim. we don’t believe in restricting your ability to do business your way. At tim. our approach is intended to give you better control over your business finances, so you can go about running and growing your company.
With tim. there are no long-term contracts and with that, no ridiculous restrictions. Our product is user friendly that is why we call it “flexible invoice financing”.
The smart alternative to a business loan is the tim. invoice finance solution. Get immediate cash today of $50,000 to $5 million.
“Get Tomorrow’s Cash flow Today”