Get Paid By Your Customers Faster With Invoice Finance

There are a number of reasons why you might want to bring revenue recognition forward in your business. We explore some of the main reasons business owners seek to bring revenue forward and look at solutions that make it possible.

Planning to grow your business

Growing your business often requires capital to invest in equipment, stock or other resources. If you have to wait extended periods for your customers to pay their unpaid invoices, you could miss the boat on your business growth plans.

When pitching for more and larger jobs, you must have the ability to fulfil the contracts once you’ve won them. Maintaining business cash flow as you pick up multiple jobs is really important. With a strong cash flow position, you’re able to pay any employees or contractors for their work and keep on top of all the purchases you need to make for the upcoming projects.

Seasonal cash dip

When your work is seasonal, it can be hard to keep afloat during the off-peak seasons. Let’s assume your business slows down over the winter months. Without any income, you may struggle to keep up with the neverending business expenses like wages, insurance, rent and marketing activities. Bringing forward your revenue recognition may help ease those cash flow challenges.

Slow paying customers

If your customers have been taking an extended amount of time to pay outstanding invoices, you may be out of pocket and having to chase them for your money. Late payments impact all businesses, but can be especially hard to manage when you already have long payment terms. For example, if you offer credit terms of 90 days, and then your customer doesn’t pay by the due dates, it’s possible you could be out of pocket for months while you wait for payment.

These are just a few reasons business owners seek to bring forward their revenue. A way that you can achieve this is with invoice financing (also known as debtor finance). Invoice finance is a type of business finance that works differently to a regular secured or unsecured business loan. The finance amount directly relates to the value of your outstanding invoices.

Bring forward revenue recognition with invoice finance

If you have supplied a product or service to another business, the day you write the invoice, you can claim up to 85% of that invoice value immediately. So if the invoice amount is $10,000, rather than waiting out the credit terms for your customer to pay you, you can access $8,500 from that invoice virtually instantly.

Once your customer pays that invoice, that clears (and essentially repays) the amount that you’ve drawn and the balance gets sent through to you, meaning you can recognise the revenue from your invoice up to 90 days earlier than you would without an invoice finance facility.

Benefits of invoice finance

• Ease growing pains

As your business grows, certain ‘growing pains’ can be felt along the way — especially when you don’t have the necessary resources to keep up with business growth. With an invoice finance facility, because the finance amount is based on your growing accounts receivable ledger, you have access to an increasing amount of credit to fall back on if you need it. As you win new business and issue invoices, the availability of funds to draw on is increased, meaning you can smooth out any cash flow issues arising as a result of your growth.

• Acts as a line of credit

With an invoice finance facility, you are free to draw down funds when you need them, so you don’t need to pay interest on a lump sum of money like you would with a business term loan. As your customers pay their invoices, the line of credit is repaid.

• Property value is not needed as security

Many self-employed people and business owners put their home on the line when securing a business loan. With invoice financing, the invoices themselves act as security, so you don’t need to worry about using equity in your family home as security.

Streamline your cash flow with invoice finance

If you’d like to discuss how invoice finance can help you get paid by your customers faster and effectively manage your cash flow, we’d love to chat! Simply request a quote and we’ll be in touch soon!

P.S. Here’s a list of some of the solutions we’re providing for clients.  

• $1M low doc loan to fund environment remediation.
• $50k unsecured overdraft line of credit for a residential home builder to pay subcontractors.
• $2.8M low doc loan with repayments against farmland while a rezoning application is processed.
• $140k equipment finance for a laser hair machine.
• $1M equity cashed out of truck assets to raise capital to buy a business using equipment finance.
• $150k capital raise by cashing out of equity against specialist metal engineering equipment to order a specific steel product from Japan.

We provide finance solutions for all types of business circumstances! We look forward to discussing your situation.