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  • Supply Chain Finance for SME’s

    Supply chain finance (SCF) is a valuable tool for small and medium-sized businesses that are growing or struggling to grow because of unstable cash flow.   In this article, we’ll explore what supply chain finance is, how it works, and why it’s become increasingly popular among businesses of all sizes. First, a success story: Sheltering from the storm – a case study Robert was no stranger to success in the manufacturing world. His company had become a market leader through hard work, savvy business moves, and a dedicated team. However, Robert also had the foresight to realize that economic winds can shift rapidly.   As predictions of an economic storm on the horizon increased, he knew being proactive was key to protecting his business. That’s when Robert came to us, intrigued by this concept of supply chain finance. Despite his business’s strength, he understood the need to secure more flexible cash flow options to reinforce his company’s financial fortifications. The Solution We showed Robert how supply chain finance offered a solution that would benefit his company regardless of what the economy threw his way.   We would pay Robert’s suppliers upfront on Robert’s behalf. But crucially, Robert wouldn’t need to repay us until after he had delivered products to his own customers and booked the profits. Robert immediately saw the strategic value in this approach. It would decouple his payables from their receivables cycle, providing a cushion of flexibility. If an economic downturn did arrive, Robert would have a built-in solution for keeping his  supply chain humming along smoothly. However, supply chain finance wasn’t just a defensive manoeuvre. Robert was equally excited about the opportunity to offer his own suppliers’ early payment in exchange for a discount. This would improve his margins while strengthening loyalty across his supply chain during both good times and bad. Success Implementing supply chain finance allowed a proactive business leader like Robert to control his own destiny. Instead of being reactive to potential headwinds, he could batten down the financial hatches early and keep his firm’s sales engines running full steam ahead. In the months and years that followed, supply chain finance proved to be a wise investment. Robert deftly leveraged it to support growth, nurture key supplier relationships, and safely navigate any temporary choppiness in the waters. His foresight and strategic use of this financial facility allowed his company’s success story to play out unencumbered. Huge global market The global supply chain finance market is significant and growing rapidly. According to a report by Allied Market Research in September 2023, it is projected to reach $13.4 billion by 2023, growing at a compound annual growth rate of 8.8% during 2022-2031. Until recently, large SCF platforms catered primarily for blue chip companies.  Now, supply chain finance is available to businesses of all sizes. What is the purpose of supply chain finance? The primary purpose of supply chain finance is to improve cash flow and working capital for both buyers and suppliers. It typically involves three parties: the buyer, the supplier, and a finance provider. Why Do businesses Use supply chain finance? A company (the buyer) that wants to preserve its working capital might take as long as possible to pay for goods. That’s generally an unpopular move, so, it arranges for a finance company to pay suppliers on its behalf. The finance company gets its money back after the buyer has on-sold the goods or engineered them into a product that is later sold. It means that the company is able to generate a profit without using its own money.  Typically, it will repay the finance company within 60 days to 90 days although it can be even longer. The supplier of the goods also wins because instead of waiting weeks or months for the buyer to pay, it gets paid on the due date. If the supplier offers a discount the bill can be paid even earlier ensuring it has working capital available to meet its daily needs. How does supply chain finance work? In this example, Company B gets paid early, improving its cash flow. Company A can hold onto its cash for an additional 60 days, improving its working capital. What is dynamic discounting? Dynamic discounting (also known as early payment discounting) is a strategy that complements supply chain finance and can provide additional benefits to both buyers and suppliers. With dynamic discounting, suppliers offer a sliding scale of discounts based on the number of days the buyer pays early. The earlier buyers pay, the larger the discounts they receive. Dynamic discounting can be integrated into SCF platforms, allowing buyers to take advantage of early payment discounts while still benefiting from extended payment terms. This approach can further optimize working capital and cash flow for both parties. How much does supply chain finance cost? The cost of supply chain finance varies depending on the finance provider, the creditworthiness of the buyer, and the specific terms of the arrangement. Typically, the finance provider charges a fee based on the invoice value and how long it takes for the funds to repaid.  What are the benefits of supply chain finance? Buyers Sellers What are the downsides of Supply Chain Finance? What is the difference between supply chain and trade finance? While supply chain finance and trade finance share some similarities, they are distinct financing solutions: Trade Finance: This is a financing solution designed to facilitate specific purchases from domestic and international suppliers. Supply Chain Finance: SCF is more holistic to the extent that it focuses on optimising working capital and cash flow within a buyer-supplier relationship mostly within a domestic or regional supply chain. What is the difference between supply chain and invoice finance? Supply chain finance and invoice finance are both working capital solutions, but they differ in their approach and target audience: Invoice Finance: (also known as factoring or invoice discounting). It involves a finance provider purchasing a company’s outstanding sales invoices at a discount and advancing a percentage of the invoice

    March 15, 2024
  • Business Loans For SME’s- The Complete Guide

    Introduction SME business loans come in an array of options, but the challenge is making the right choice for your business, so in the following short chapters, we’ll show you how to find a lender and a loan that meets your needs and explain how to ensure that your loan application is approved. 1. The Grim Reality Business survival statistics are sobering. As many as 5000 businesses, give or take, stumble into financial strife and close their doors each year in Australia. New businesses face the toughest battle. Flipping a coin The odds of a start-up going under within 4 years are about the same as you could expect from flipping a coin. That means only half of the companies which opened their doors in 2019 will still be open for business today. Clearly, for many people, the dream of owning your own business will sour. A primary reason is poor cash flow. It’s true that more business go broke from poor cash flow than from poor profits. Cash flow New business owners, in particular, underestimate the funds needed to sustain their operations so they poorly prepare for the requirements imposed by lenders. Rejected No surprise then that Lenders reject 37 per cent of new applications for business loans from rural Australia. Nearly as bad, if you live in a city you are not much better off. Lenders reject 25% of loan applications from urban based firms. Of those SME’s lucky enough to get a loan, one-third told the Australian Bureau of Statistics that they needed the money to survive. To ensure your company enjoys easy access to business loans and doesn’t become another unhappy statistic it is vital you understand how to present a powerful and persuasive argument to the lender of your choice. We’ll start with what not to do first. 2. Six Mistakes To Avoid Sketchy credit One of the first things a credit analyst will do when you ask for money is obtain a credit report on your company and each of its directors. You’ll probably get away with a few minor blemishes here and there – perhaps a phone or power bill you forgot to pay. Most lenders will ignore these as long as the debts have been remedied. More significant blemishes are not so easy to sweep under the carpet. If you have too many, your loan application will be dead before it lands in the credit analyst’s inbox. Statistics At the back of every lender’s mind are the following statistics from the credit agency, Creditor Watch. If you fall into any of these categories, you must provide convincing reasons a lender should ignore your credit history. There are lenders who will deal with “credit impaired” borrowers but you can expect to pay more for your loan and provide the lender some kind of tangible security – usually residential or commercial real estate. Late creditor payments Lenders like to see their business loans repaid promptly. Any hint that you may not is going to endanger your application. The credit analyst will examine the repayment history of all your credit accounts. You are on a slippery slide to nowhere if the documents show payments to suppliers are always late. It’s a sign of a struggling business. Unless you love rejection, don’t submit documents showing consistently late payments to your creditors. Postpone your application to bring them up to date if you can. Dishonoured payments Someone will scour your business and personal bank accounts before an application for a business loan is approved. Among other things they are looking for dishonoured payments. You might get away with one or two, but a bank statement littered with them is a convincing sign that business isn’t going well. It’s not going to be good for your loan application either. In some instances, lenders want to see 12 months’ worth of business bank statements and, yes, someone will go through them line by line. To get that application approved make sure you keep dishonoured payments to a minimum and have a good reason to explain the ones that are there. It’s surprising what an analyst can learn from your bank account. It’s not a good look when the account shows daily visits to the bottle shop, the TAB or the pokies. These alone might not endanger your application, but they raise red flags. Tax Many business owners use the tax office as a substitute bank. It’s understandable. You need cash to run your business, so instead of making a tax payment you spend the money on stock or to pay staff hoping things will turn around. Lenders understand this can happen, but if you have a significant tax debt and have not entered an arrangement with the Australian Tax Office to pay this money back you can forget about a loan. Lenders don’t want an ugly fight with the ATO over your who gets first dibs on your assets in a forced wind up. In short, make sure your tax affairs are in order before applying for finance. Last minute According to a report by the Australian Bureau of Statistics, too many business owners leave their applications for business loans until the last minute. It shows a lack of planning and a poor understanding of what your business needs.  You’re inviting rejection. No one wants to risk money on a business owner who waits until the last minute to solve a problem. Your business can tell you when you are running short of funds long before you do. Listen to what it’s saying (or your accountant) and do the spade work for the day you will knock on a lender’s door. 3. What Lenders Want Every lender wants to see a capable and experienced management team running a company. In other words, you need to inspire confidence. This first step is straightforward. Switched on Get clear in your head how you are going to use the money you want to borrow. Is it for new equipment or a

    March 4, 2024
  • The Complete Guide To Invoice Finance

    In this complete guide to invoice finance, we’ll show you the way to business success by explaining how invoice finance can help you to stabilise your cash flow and unlock working capital to support growth. We will explain the different types of invoice finance; how to choose what best suits your business; how to qualify for funding and some of the tips and tricks you’ll need to successfully navigate your path. Introduction If you sell goods or services to other businesses there is a strong chance that you give your customers payment terms and wait 30, 60 or even 90 days for payment. In this competitive world, long payment terms are more than just an expectation they are a necessity, but, they can devastate your cash flow particularly when you need a steady supply of funds to support your company’s growth. We’ve been helping SME’s meet this challenge for over a decade by showing them how to unlock the cash hidden in their receivable’s ledgers. The key is invoice finance. It is a very effective strategy for improving a company’s cash flow, but it comes in many guises. Choosing the wrong option can be expensive. What’s in a name? Sometimes, companies advertise invoice finance as invoice factoring, debtor finance, invoice discounting, and receivables finance At the end of the day, they are all basically the same: a business uses all or a portion of its receivable’s ledger as security for short-term loans. Any differences lie in the nuts and bolts of each facility and what each lender requires to set one up How does invoice finance work? Businesses can only use invoice finance for transactions with other businesses. In its simplest terms, it works like this example: Jerry’s company makes bicycle chains. Linda is his best customer. She installs the chains on her bicycles which she sells to the public. The pair agree that Linda does not have to pay for the chains for 30 days. It is a great deal. Linda benefits because she has a month to sell her bicycles, take a profit and pay Jerry ‘s invoice. Jerry benefits because a good customer remains loyal. However, every now and again, Jerry’s cash flow becomes tight, so he asks an invoice finance company to buy the invoice he has issued to Linda . The finance company will ask Jerry for a small discount on the face value of the invoice. For example, if the invoice is worth $100.00, and the discount is 3%, Jerry receives $97.00 to help his cash flow. When Linda pays the $100 she owes, the finance company recovers the $97 it advanced and earns a $3 profit. Check out this video: How invoice finance works for more info. Why do businesses use invoice finance? Invoice finance provides a way for a business to manage cash flow when its clients take a long time to pay their invoices. It ensures the business always has money in its account to pay its bills in a timely manner. Failure to pay important suppliers, rent, utilities, staff and tax on time can cause serious reputational damage to a business and can invite creditors to take legal action which means the company’s credit rating suffers a severe hit or worse. Why doesn’t Jerry ask Linda to pay sooner? Jerry has offered Linda 30-day terms to keep her away from his competitors. He worries that if he insists on earlier payment, she will start shopping around, and he could lose a good customer. Why not offer Linda a discount if she pays sooner? Jerry knows that offering discounts to clients can backfire because they come to expect them with every transaction. He doesn’t want to give discounts to customers unless he has a good reason. By using a finance company he can pick and choose when he wants to discount. What type of invoice finance facility should I choose? There are two broad types of invoice finance products and the one you choose will depend on your cash flow requirements. One is single invoice finance, the other whole-of-book invoice financing. What is single invoice finance? Single invoice finance, also called selective invoice finance, is very flexible. It allows you to pick and choose which of your sales invoices you want to sell to the finance company. You can raise funds using a single invoice or multiple invoices. You can come and go as you please. In most instances, there is no lock in contract requiring you to continue selling sales invoices for a certain period. Many clients will set up an account and use it only when the need arises with weeks and even months between transactions. Finance companies primarily rely on the quality of the financed invoice and the strength of the customer’s business to approve funds. What is whole-of-book financing? This traditional form of invoice finance, commonly called factoring in the past, involves a lender advancing funds against a company’s entire debtor’s ledger (receivables ledger) as security for funds for an agreed period, of at least 12 months with an automatic renewal. Companies that consistently require access to significant amounts of cash to keep their operations running smoothly use whole-of-book facilities. The financier will lend a percentage of the debtor’s ledger at any given time and keep track of all customers, payments and bad debts to ensure you always have enough money coming in to repay the funds and keep the client afloat. Because monitoring creates costs, the finance company will often require its customers to sign a long-term agreement. How much does invoice finance cost? Let’s deal with the big picture first. Single invoice finance and whole-of-book finance operate quite differently and pricing comparisons between the two are pointless. The thing to remember is that there are no standard fees.  Pricing between companies varies widely depending on the services provided. For example, some lenders offer a total credit control function, others do not. The former will attract higher fees. When determining your fees, a lender will

    February 22, 2024
  • Googled Invoice Finance Westpac? Why not give non-bank lenders a look?

    So, you’ve typed the words “invoice finance Westpac” into Google’s search box. No surprise. It’s a popular search term undoubtedly used by many Australian business owners needing cash flow support. Westpac, like the other big banks, offers invoice financing and we are not criticizing any of them. However, it’s worth pointing out that the Big Four aren’t the only companies in Australia providing this service. Below are 10 good reasons why you should, instead, consider using an independent non-bank lender to obtain invoice finance. Flexibility: Independent lenders are often more flexible with the terms they offer. That means they can tailor a solution specifically to your business needs, which big banks may not.Personalized service: Unlike larger institutions, small non-bank lenders can provide a more personalized and attentive service. They take the time to understand your business and its specific requirements. Speedy processing: If time is of the essence, non-bank lenders tend to offer faster approval and processing times, providing quicker access to much-needed funds, which could be crucial for your business. Competitive rates: Often, independent lenders can provide more competitive rates compared to what big banks typically offer, saving you money in the long run. Agility and innovation: Non-bank lenders are often more agile and open to innovative financing solutions compared to traditional banking institutions. This could mean more creative ways to support your business. Less red tape and bureaucracy: Smaller lenders often involve less bureaucracy and red tape, streamlining the invoice financing process and making it easier for you to access the funds you need. Effective communication: Non-bank lenders usually have clearer communication channels, leading to faster responses and better decision-making, which means less hassle for you. Specialized expertise: Small lenders often have specialized expertise in invoice financing, offering a depth of knowledge that larger banks may not possess. Tailored solutions: Independent lenders can tailor their offerings to meet specific industry needs, providing more targeted solutions compared to the one-size-fits-all approach of large banks. Supporting small businesses: Independent lenders are often more supportive of small and medium-sized enterprises, offering a more personalized approach to lending and working with you to help your business grow. So, if you’re looking for a more personalized, flexible, and supportive solution that meets your business’s unique needs, instead of typing “invoice finance Westpac” into the search box try this alternative “invoice finance my working capital”. That’s us and we’d love to show you what we can do for you.

    February 16, 2024
  • Boosting Cash Flow: Invoice Finance For Transport Firms

    The heartbeat of all transport companies relies heavily on the smooth flow of operations and, of course, the timely payment by customers. Sadly, payment delays will often severely impact a company’s ability to meet its deadlines with damaging consequences for the business. In this case study, we will explain how single invoice finance for transport firms helped one company to overcome a cash flow speed bump and enabled it to efficiently optimise working capital to create growth. Payment Slow Lane Like many in the industry, the company’s operations and growth were hampered by the challenge of clients demanding extended payment terms.  While its trucks were always on the road ensuring that goods were delivered without fuss and on time, the invoices sent to clients were lingering in a slow lane. With fuel costs fluctuating and maintenance demands on the rise, the delayed payments took a toll on the company’s ability to meet its immediate financial obligations. The need for a solution was as urgent as a delivery deadline. Single Invoice Finance The solution it chose was single invoice finance which enabled the company’s managers to handpick specific invoices for immediate funding. In other words, instead of waiting weeks or months to receive payment from a client the company received funds from us pretty much straight away.   Follow this link for a detailed explanation of how invoice finance works Because the managers handpicked which invoices to be financed, the company retained control over its financial operations while addressing the pressing issue of delayed payments. By using invoice finance for transport firms, the company unlocked the liquidity needed to cover operational expenses, from fuel and maintenance to driver salaries and other overhead costs. Accelerating Success The impact of invoice financing was huge. The company experienced a newfound financial flexibility. The ability to choose which invoices to finance enabled the owners to optimise their cash flow strategically, ensuring that critical expenses were met promptly. Moreover, the improved cash flow allowed the firm to capitalize on new business opportunities. It could take on more shipments, invest in technology to streamline operations, and even negotiate better terms with its own suppliers. As the company grew and the amount in its receivables ledger increased, so did lts access to funds. To labour a pun, the company shifted from the slow lane of financial constraints to the fast track of growth and resilience. Key To Success The case study highlights how invoice finance for transport firms can serve as a lifeline for companies facing cash flow challenges. In the dynamic world of logistics, where timing is everything, having the ability to accelerate cash flow through selective invoice financing can be the key to success.

    February 14, 2024
  • Understanding Cash Flow in Business in 2024

    More businesses collapse due to poor cash flow than poor profits. creating solid, stable cash flow in business is vital to success.

    February 5, 2024
  • Invoice Finance Explained: A Quick Guide For Business Owners.

    Discover why business owners use invoice finance to stabilise cash flow and grow their businesses

    January 31, 2024
  • Video: How Invoice Finance Works

    This short video describes how single invoice finance works and how it can help to relieve the stress caused by poor cash flow and provide a foundation on which to build a stronger business without having to commit to a long-term loan contract. Quick & Simple If you want a quick and simple solution to a temporary lack of working capital then single invoice finance might be what you are looking for. It is especially good: How does it work? We will buy an invoice that you have issued to a customer but which hasn’t yet been paid You’ll receive cash for that invoice in exchange for a small discount. How much will it cost? It’s probably less than you would offer that customer to pay you early – which you don’t want to do in case it becomes an on going expectation. Fine Print This flexible financing alternative allows businesses to avoid the complexities and fees associated with traditional financing options, ensuring a streamlined and efficient financial solution. With the ability to swiftly convert unpaid invoices into working capital, single invoice finance offers an attractive option for businesses seeking immediate liquidity without compromising long-term financial stability. By understanding the benefits and considerations of this financing option, businesses can make informed decisions to effectively manage their cash flow and sustain their operations.”

    December 20, 2023
  • What is Single Invoice Finance?

    Don’t let late-paying customers hurt your business. Here’s how to use single invoice finance to get back on track.

    December 20, 2023
  • What is Supply Chain Finance and Trade Finance?

    What is the difference between supply chain finance and trade finance? While they are both designed to support your cash flow by ensuring your domestic and international clients are paid in a timely fashion there are some important differences. Supply chain finance (SCF) allows you  to offer early payment to suppliers in exchange for discounts which reduces your costs. The facility is underpinned by trade insurance which means that,  in most instances, no property security is required.  However, director guarantees would be taken. Supply chain finance also requires that you fund a deposit for the goods you are buying, however if you don’t have available cash, the funds for this can be raised using our trade finance (TF). Trade finance is not supported by trade insurance so company directors must offer some collateral, but trade finance can be used to pay deposits and pre-shipment costs. How supply chain & trade finance work? In both instances, we give you an off-balance sheet revolving credit line which you can draw on when it comes time to pay  suppliers. Who gets paid and when is entirely up to you.  You send us the invoice, approve the payment and we release the funds. After the agreed period of time, you top up the line of credit with funds which are available to use again. What’s the best use for supply chain & trade finance? Both facilities are best used to access working capital when you have a project to complete or to obtain goods for which you already have a sale. For example, your furniture company takes an order  to provide furniture for a new hotel development.  You use the credit line to pay your overseas supplier.  When your customer pays your invoice you use the money to top up the credit line which is available to fund your next order. How do I qualify for supply chain & trade finance? Your business should have  a proven track record of activity in your industry. The company should be in a sound financial position with a good credit report and taxes up to date or, at least,  a payment plan in place. Your suppliers should be established companies with a strong track record. How quickly can I receive funding? Once we have received your application and supporting documents we can be set up and ready to roll within a week. How much will it cost? You only pay for the funds you use. In general, you will pay a small daily rate for drawn funds. If you are using supply chain finance, you can offset that cost by obtaining a discount from your supplier in return for early payment of their invoice – though this is not mandatory. Do we need to change banks or existing financing arrangements? Not from our point of view.  Our credit line is off-balance sheet and should not interfere with existing arrangements you have in place. What security do I have to provide? Supply chain finance is supported by credit insurance.  Depending on the size of your business and its trading history  we may require a charge over the company assets and accept director guarantees. Trade finance will be supported by real estate or company assets as well as signed guarantees. Can you pay overseas suppliers? Yes. Both supply chain and trade finance enable you to pay international manufacturers and suppliers. Trade finance will fund deposits and pre-shipment costs. Do all my suppliers have to enrol to receive early payment? No, but there are huge benefits to suppliers from receiving timely or early payment of invoices, so we would encourage as many as possible to sign onto our platform. This is also important from your point of view because the more suppliers you have the lower your costs will be. How are these facilities managed? Your facility is managed  through our state of the art online platform  . You can upload invoices, determine when they should be paid and to who. Your supplier may also have access to the platform to request early payments. The platform allows you to determine and manage your costs and track all transactions with clear and concise reporting which can be integrated into your existing accounting system.

    December 20, 2023
  • How Invoice Finance For An Engineering Firm Saved The Day

    This case study illustrates how invoice finance for an engineering firm rescued the owner from a potentially embarrasing predicament, Our client offered specialized engineering services to  infrastructure projects. It was a small relatively new company with a reputation for good work. The client wanted to build on this and was ambitious for growth and success. Over The Moon So, he was over the moon when he won a tender to assist in the construction of a large new facility for a multi-national company. It was worth a lot of money. But, while he was focussing on the rewards he didn’t give a lot of thought to cash flow. Downside He soon realised  that the  downside of this “great” contract was that the multinational’s payment terms were 60 days from the end of month in which invoices were issued. When we met, he was sweating on a payment of $150,000 which wasn’t due for a further 30 days. Embarrasment He had no working capital available to meet his obligations. He had gone cap in hand to the bank but it wouldn’t help him. His worst fear was that he couldn’t pay that week’s wages. He absolutely hated the thought of disappointing his staff some of whom relied on the money coming in week to week. He also hated the embarrasment and loss of face he would suffer. Invoice Finance We were the right people to call because many of our colleagues have a blanket policy of declining finance to companies involved in construction.   We judge applications on a case by case basis and in this case were able to approve his request for funds. Three days after receiving his application we approved a new invoice finance facility for his firm and advanced 80% of the value of the $150,000 invoice. That gave him enough money to meet all his commitments and  much needed breathing space. At the end of the month,  when the invoice was paid,  he received the remaining 20%  less our fee. Quick It was a quick, flexible and very customer focused solution which helped him get through a sticky patch. He particularly liked that we did not ask him to sign a long term factoring contract.  He could come and go as he pleased. We did not require his home as security and our transparent pricing meant he knew his exact costs upfront. Here’s where to go to find out more about  invoice finance  or any other business.

    December 20, 2023
  • How To Nail Your Application For A Working Capital Loan

    You can’t sugar coat it. Applying for business finane is tedious and painful, so here is how to nail your application for a working capital loan. The trick is to have everything in place before you start.  Patchy paperwork  raises questions about your business and your competence to run it. It begins with the application form. It’s personal A lender wants to get personal and will ask for details such as your age, marital status, where you live, the location of your work place and your contact details. You will be asked to provide photo identification – a driver’s licence and/or a passport.  Preferably both. Solid citizen Many lenders will want a Statement of Financial Position.  This details what you have in the bank account, what you own and what you owe.  This is really about demonstrating your credentials as a solid citizen who won’t, as the song goes, take the money and run. Blemishes The lender will conduct a company credit check. Poor credit history will make things difficult, but won’t necessarily rule you out.  Most finance companies understand  that the occasional credit blemish happens to the best of us. Many finance companies will require security for a working capital loan and want to place a  charge over the assets of the business, so they will check the Personal Property Securities Register (PPSR) to see who else you owe money to. Positive picture Lenders are looking for a positive picture of you and your business.  Your financial documents will go a long way to provide that. Yes, pulling all that stuff together is a headache, but it ensures you quickly get the funds you need at the best rates available.  Ask your accountant or book keeper to help and give thanks for the invention of online accounting software! These include: Interim financial statements. End of year Balance Sheet and Profit and Loss Report BAS statements for the last 3 quarters Most recent tax office running balance – your accountant will have access to this.. Current bank balance and transactions for the preceding 90 days. Up to date aged debtors listing Up to date aged creditors listing Where a Trust is involved, a copy of the Trust Deed Customers If you want to raise finance against your receivables, it is important to provide evidence that you have delivered the goods or services to you customers. The following documents will help. A copy of invoices showing the amount owed, the name of the customer and the payment dates..  It’s not a good sign if an invoice is overdue. Proof of delivery – including dockets, emails, payment schedules or anything that shows that your customer has received the product or service Terms and conditions of sale to check if there are any conditions which could reduce the final amount paid by your customer. “Yes!” Your application for a working capital loan will have the inside track if you are able to provide the information described above. If credit insurance, personal guarantee insurance or a performance bond is involved it may take a little longer. Finance companies are sensible enough to understand that not all their boxes will be ticked, but that might not rule you out – especially if you have given them a positive impression. It’s a competitive world and lenders are in business to do business The important thing is to create the impression of a strong business with strong and capable management.

    December 20, 2023
  • Be Careful of Hidden Time Bombs in Invoice Finance Contracts

    Tread carefully if you thinking of using invoice finance. While it is a very effective strategy for improving your company’s cash flow it comes in many forms – some containing a few hidden time bombs. Choose the wrong facility and you could blow a big hole in your bottom line. What may work for your mate’s business, or the one down the road, may not work for you. The biggest danger is to be fooled by a sexy headline rate. Many business owners are and become blind to the time bombs hidden in the fine print. Pyrotechnic A client of mine was recently contacted by a competitor offering him just such a pyrotechnic. He was completely sucked in by the cheap rate. Wrong The client sent me a copy of the offer. He made it clear that we would be parting ways unless I matched or bettered the apparent lower price. It put me in a difficult position. Our fee reflected the risk involved in dealing with this client.  It also reflected our high service standards. I wasn’t going to devalue either. Neither did I want to bag a competitor even when I could see the offer was wrong for my client. So, I decided the best thing to do was lay out the case for each facility and let him decide. Full Service To begin with our competitor required that my client sign a 12-month contract and enter into a “full service” agreement. That meant the finance company would take control of my client’s debtors’ ledger. All invoices issued by my client would provide security for any funds advanced by the financier. The financier would also provide accounts receivable management, reminder letters, monthly statements, cash allocation and telephone collection activities. Now, some businesses don’t like handing this sort of control to a finance company, but others love it because it reduces their workload and provides certainty.  The business owner knows working capital will always be available each month come what may. It works particularly well when a business has lumpy cash flow, but lots of customers and strong earnings. Not Suitable My client’s business was nowhere near there yet. It had a handful of customers.   Some paid early, some paid late.  In some months, he needed working capital, in others he didn’t. The new agreement required he finance all invoices whether he needed funds or not. Even if a customer paid immediately, the finance company would charge a fee.  He couldn’t afford that. Our single invoice finance facility was more suitable. There was no lock-in contract. We charged only for invoices the client sold to us.  It was up to him to decide when he needed funds. Fees There were also big differences in the fee structures of both products, We charged one fee  determined by the amount of the invoice and how long it took to get paid. The cost ranged between 3% and 5% of the invoice amount over 30 days. We were more expensive than our competitor’s sexy headline rate, but we offered greater flexibility. We also provided quick decision making and a highly individualized service.  That’s worth something. Our client also retained control of his debtors’ ledger. Attractive Our competitor promoted an attractive headline rate of 2.5%.  It applied to all invoices issued by the client each month. But there was a minimum monthly charge of $1,500 plus GST.   The client would have to pay that whether he had the invoices to factor or not. That’s $18,000 a year. There was also: A $2,500 application fee Legal fees An annual interest rate of 11.75% charged on monies advanced. An account keeping fee charged on every transaction. An exit fee. Reasonable All “full-service” debt factoring providers have these kinds of fees.  It’s their way of recovering the cost of setting up and managing an account which may have dozens and even hundreds of debtors. For the most part, the fees are reasonable. Banned The one fee I do find unreasonable is the exit fee. The government banned home loan lenders from charging exit fees. Not so,  invoice finance companies most of whom will charge an exit fee if you decide to end a contract early. You  can be forced to pay thousands of dollars. In our case, there is no contract. so, there is no exit fee. Clients can come and go as they please.  It’s up to them. Trap Our competitor also required 90 days notice to break a contract. This can be a dangerous trap. Financiers will often reduce the amount they fund during the notice period. Sometimes they won’t fund any invoices at all. This can leave the business owner stuck without cash flow for up to three months. It would have broken my client. Fine Print There were other important items not discussed in the offer. There was no mention of debtor concentration. You should always ask about this and how it will work before signing an agreement. Let’s say you have a  credit facility a $500,000 a month and you have 20 customers. The financier will advance up to 80% of that ($400,000). If you lose a couple of big customers your debtor concentration has increased. The finance company will reduce the funds available to you because there is now a greater risk. In the worst case, if you fall below the debtor concentration limit, it may give you nothing at all. This can throw your growth plans, or even your survival plans,  into chaos. We’re a bit different. We don’t have debtor concentration limits.  We’ll provide 80% funding on a single debtor. Decline Our competitor also reserved the right to decline invoices. That’s ok.  We do the same. The difference is that we won’t charge for invoices we’ve declined. Under the terms of the full service agreement, our competitor would charge a fee. Great Tool Debt factoring is a great tool for managing business cash flow and enabling growth. Sign the wrong invoice finance agreement, however, and you could find yourself in a mess of trouble. We are often approached by business owners begging us to help them escape an unsuitable contract. Inevitably, it means they will face high exit fees. Wrong Offer In this instance, the

    December 20, 2023
  • Invoice Finance For Business – Something To Shout About.

    As a provider of invoice finance for small businesses, it’s not uncommon to encounter concerns from business owners about disclosing their financing arrangements to customers. However, it’s essential for these entrepreneurs to recognize that invoice finance is not something to be ashamed of, but rather a responsible and strategic financial tool. Openly communicating this arrangement can potentially demonstrate to customers the stability and forward-thinking approach of the business—a move that can foster transparency, trust, and flexibility in working relationships. In this article, we’ll delve into the importance of being forthright about invoice finance and how it can benefit both the business and its customers in the long run. A great tool for doing business In reality, invoice finance, or invoice discounting as it was known to an older generation,  is a great tool for small businesses experiencing lumpy cash flow or who need funds to capture new opportunities and boost growth. It is simply a strategy to get your hands on cash as soon as possible rather than having it locked up in your receivables while you wait for your customers to pay. This ready access to working capital means you are able to provide a better service to your customers and build stronger relationships with your suppliers. The added bonus is that because you are receiving payment for services rendered, it doesn’t go on your balance sheet as a loan. Invoice finance is mainstream Invoice finance is a mainstream alternative to traditional business funding options.  It has been around for centuries – some say since the time of Cleopatra. Last year, the Australian invoice finance industry turned over close to $62 billion dollars. More than 6000 companies used invoice finance to raise working capital – most of them strong and on a growth trajectory. According to the Debtor and Invoice Finance Association of Australia,  the industry experienced an 8-fold increase in turnover between 1999 and 2010. A responsible option for your business Think about this: Isn’t improving cash flow by turning unpaid invoices into immediate cash a more responsible way of doing business than shackling your small business with more long-term debt? Why should somebody put their family home at risk to raise working capital when a debtor finance arrangement, which often requires no property security, will do the job? It doesn’t make sense and wisely thousands of Australian business people agree. Persuasive arguments for invoice finance Here are some persuasive arguments you can use if you think customers will judge you poorly for using invoice finance: Reassure them that you would not have been approved for funding if your business wasn’t sound. Explain invoice finance company is just a management tools to ensure you always have adequate cash flow available to serve them and excel at meeting their needs. If you are involved in a short-term single invoice finance arrangement, explain that you still retain control of your accounts. No one else has their hands on your business If you have a long-term contract and finance your entire debtors ledger,  point your customers to the figures which demonstrate  how popular and effective this form of raising finance has become. Embarrasment about using invoice finance is unfounded Like many things we fear, our concerns tend to be unfounded.  Many first-time users of invoice finance begin the conversation with their customers only to discover that they also have an invoice financing arrangements in place.

    November 2, 2023
  • Don’t Rob The Piggy Bank! Supplier Finance Can Fix Your Cash Flow Issues

    If  you are looking for a reliable and effective way to improve your cash flow here’s where to start. Many business owners find Supplier Finance allows them to create  much better outcomes than they would  using traditional business loans. The reason?  It’s flexible design. Supplier Finance grows with your business ensuring you always have access to working capital.  It gives you breathing space because the finance company pays your suppliers on your behalf.  You return the funds when you have money in the bank – after your customers have paid. It begins with  an off-balance sheet, revolving credit limit which works like this: Your provider uses funds from your approved credit limit to pay some (or all) of your  suppliers’  invoices – it’s up to you how many and when. You have up to 150 days to replenish  the account. As the account is topped up the funds are rolled over to pay more invoices. It doesn’t get any more complicated!   The process is managed by you through an online platform. You can reduce your borrowing costs by offering suppliers early payments in exchange for discounts.    If you  meet the criteria, your facility can also be secured by trade credit insurance. Supplier Finance  has many benefits Funds are always available to pay suppliers You can preserve your own funds to invest in growth Your facility grows alongside your business Your supply chain remains in good health You earn massive brownie points from suppliers because of early or timely payments You can use your account to pay overseas suppliers – including  pre-shipment payments and deposits. You avoid the tedious process of raising letters of credit for overseas purchases. No real estate security is required if your balance sheet is strong enough. Complete the contact form below if you would like us to contact you.  If you want to discuss it now call Paul on 0411 535 096

    August 15, 2018