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Invoice Factoring

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What Is Invoice Factoring?

Invoice Factoring is a type of Debtor Finance that allows you to unlock the money in your unpaid invoices. You sell your unpaid invoices to a finance factoring company in exchange for immediate payment. They then take responsibility for collecting outstanding funds directly from your customers. 

This type of finance is suitable for small businesses that don’t have a dedicated accounts receivable and collections department to chase outstanding payments. Under this arrangement, you typically access up to 95% of the invoice value within 24 hours.

Benefits of Invoice Factoring

Invoice factoring is a convenient way to free up funds you have tied up in your accounts receivable. Applying for business loans or alternative financing options can take weeks to get approved. Factoring allows your business to access immediate cash to keep the wheels turning.

  • Unlock funds tied up in your unpaid or outstanding invoices
  • Protection against your client not paying you or defaulting on payment
  • Low-cost pre-agreed fee paid at the time your client pays their invoices
  • Easier to secure than an overdraft as it is based on your current sales, not your past
  • Boost cash flow and working capital against your debtors whenever required

How Does Factoring Invoices Work?

The process of Invoice factoring involves your company selling its invoices to a financial institution known as a factor. The factor then pays your company most (but not all) of the outstanding amount. They’ll then collect the debt from your customers, paying you the rest of the total invoices – minus their fee.

Invoice Factoring payments are paid in two instalments. The first is made when you submit the invoice, and the second once the customer pays it. For example, your customer owes you $1,000. You sell their invoice to a factor for 95% of that amount, which pays you $950. They collect the debt from your customer and pay you the remaining $50 minus their fee.

Step-by-step process of Invoice Factoring

1. Invoice customer

You provide goods or services to your customers and send them an invoice, including terms for payment. If you want to use invoice factoring, the invoice must be due within 90 days.

2. Access funds in advance

Your provider advances you up to 95% of the invoice amount. Customers get sent a notice of assignment stating they’ve factored invoices, and the provider will receive their payment.

3. The factor collects the debt

The factoring company collects payments from customers directly when the invoice is due. These get paid into a designated account for factored invoice payments.

4. Receive the balance minus fee

When the factor has collected payment, the remaining invoice balance is released to your account minus the finance factoring company’s fees.

How to apply for Invoice Factoring

Establish your business requirements

Contact our principal broker Brin Hayden to discuss your business circumstances and begin the process. We’ll source a suitable factoring company for your needs and ensure all your crucial information is in order to secure the funding you need.

Organise and lodge documentation online

Finance providers will require solid invoices and an accurate, up-to-date view of your accounts receivable ledger to prove the creditworthiness of your business. These will include a review of revenues, profits, cash flow, existing debt levels, and how long you’ve been established. In addition to the usual business loan supporting documents, we will need to provide:

  • A valid ACN
  • Accounts receivable ledger from your management accounting software
  • Your trading accounts for the last 12 months 
  • Examples of your previous 12 months invoices
  • Demonstration that your invoicing systems are secure and robust

Gain approval and secure funding

With our guidance we can source a provider, assemble your application in as little as 5 business days. Funds will be available within 24 hours of application approval.

Why Choose Cabbage Capital as Your Finance broker?

Our founder and principal broker, Brin Hayden, brings over 20 years of experience in the commercial sector, focusing on financial solutions for small to medium enterprises to provide a real impact.

“We get small business, know what you’re trying to build, and are here to make it happen. I bring a personal approach and work with you to find solutions to work around your circumstances. Unlike banks or individual lenders, Cabbage Capital is not biased towards selling you products that benefit the provider. We’re here for you. We source finance from a network of 30+ competitive lenders and negotiate the best rates and terms for you. 

Invoice Factoring is one way to unlock working capital and bridge your cash flow gap. We’ll remove the stress of chasing invoices so you can put your energy where it’s needed most, into growing your business.”

Brin Hayden

Founder and principal broker

“We get small business, know what you’re trying to build, and are here to make it happen.”

Let’s get started

If you’d like to book a meeting to discuss your needs or start a finance application, leave your details, and we’ll get back to you within 24 hours.
Alternatively, call Brin at 0418 574 655. 

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