small business loans with invoice financing

How invoices can be used to get a business loan in Australia

Are you running a small business or just starting one? Chances are, there will be times when there’s a gap between the money you have and the money you need.

 

The question is: What steps do you take to get over this shortfall? 

 

When it comes to taking a loan, many banks and other financial providers hesitate in granting you one. This, primarily, is because of their processes, which demand necessary documentation and conditions.

 

The assets you have in such a situation are your invoices. They represent cash owed to you, and this is where invoice financing comes in.

 

It’s a way to unlock the cash-flow of your invoices, thus releasing the funds you need for growth. It’s also known as debtor financing or receivables financing.

 

How does it work? Broadly speaking, it’s a system in which you get cash right away for your invoices instead of waiting for your customers to pay. You get a certain percentage of the invoice value, to begin with, and the rest when the customer settles.

 

An Example of Invoice Financing in Action

 

Suppose a business owner has an invoice of $10,000, payable by his customer in 30 days. He approaches a finance expert, such as Hubbe, who connects him with a lender. The lender then agrees to advance funds at 10% p.a., as well as a 1.5% service fee.

 

Here, the business owner gets 80% of the invoice value straight away, which in this example means $8000. Thirty days later, the customer pays the lender the full amount of $10,000.

 

The lender keeps their 1.5% service fee on the $10,000 ($150), as well as a 0.82% (30-days of 10% per annum) interest rate on the $8,000 that was advanced ($65.8), which means that in all, the lender keeps $215.8 in fees on a loan of $10,000.

 

Now, you may think that this interest and the accompanying charges are more than what you’d pay for a loan. This is completely understandable. However, there are many advantages to invoice financing too.

 

For starters, you get the amount you need almost immediately. The process is also simpler and faster. Furthermore, you do not have to follow up with the customer for your funds.

 

These are the reasons why many people choose invoice financing as a means of ready funds and growth.

Also ReadWhy you need invoice financing for your business

 

Why Alternative Finance Makes Sense for Invoice Financing

 

Many business owners think of banks and other established financial institutions as the best place to get loans and funds to cover a temporary shortfall. There are times, however, when such organisations may be reluctant to advance funds.

 

Their processes require certain conditions to be met. They need to check for appropriate credit scores, the number of years the business has been in operation, the amount asked for, and more.

 

In such cases, alternative finance channels can be a good option to look at, especially when it comes to invoice financing. In Australia, alternative finance has seen steady growth over the years.

 

They offer several loan options, giving you more flexibility. Qualifications such as credit history are more easily overcome, and typically, the approval process is quicker. At times, the loan is even sanctioned within 24 hours.

 

Many alternative finance lenders grant invoice finance loans. To get to know the best avenues, and to get the best terms, you can get in touch with Hubbe, an institution that has a network of contacts, as well as professionals, who will help you get the best offers.

 

Wrapping it Up

Whether it’s a new firm that can’t get loan approvals by a bank or an established business that is undergoing a dry period, invoice financing can provide a terrific opportunity to release funds and get over temporary shortfall headaches.