• Updated: 13/09/2021
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The best invoice finance for small business

Invoice finance, debtor finance or accounts reconcilable finance, it's all the same. Here are the best options

  • Timelio
  • Timelio
  • - 100% cash advance for invoices with p2p lending marketplace
  • Earlypay
  • Earlypay
  • - Good account reconcilable line of credit of $50k to $15m+
  • Waddle
  • Waddle
  • - Top platform to automate your invoice finance process
  • Fifo Capital
  • Fifo Capital
  • - Best choice for fast cash advance for invoices
  • TIM Finance
  • TIM Finance
  • - Great platform to submit and self manage invoices finance
  • ScotPac
  • ScotPac
  • - All types invoice finance with this lender
1Timelio

Timelio is an online peer to peer (P2P) lending marketplace platform that connects businesses with a network of investors who compete to lend to your business. To use Timelio, you just need to set up an account and upload your invoices to their lending platform. Timelio will then find you a financer and you can receive your funds in 24 hours.

Using Timelio to find a suitable financer is quite different from other financers as you do not need a minimum turnover or time in business. The only requirement is that your business has an ABN and at least $10,000 of unpaid invoices ideally from government, large corporate, or insured customers.

There are no upfront costs or account keeping fees, however, you will need to pay a transaction fee for each invoice which will vary by size and invoice terms. A discount fee which is calculated daily will also need to be paid to Timelio investors.

The other point of difference to other lenders is that you can receive 100% of the invoice value, less any fees upfront. However, you will need to deposit a late payment discount fee equal to one month. Invoices are non-recourse, meaning you will be responsible if the customer does not pay the invoice with 45 days.

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  • Loan Type: Invoice Finance
  • Loan Amount : No maximum amount
  • Loan Terms: 100% of invoice value upfront
  • Min. Revenue: $10,000 p.m in invoices
  • Min. Trading: None
  • Unsecured?:
  • Credit Score: No
2Earlypay

Earlypay was founded following the merger of Skippr and CML group and is listed on the Australian stock exchange (ASX:EPY).

With Earlypay debtor finance, you can access a line of credit up to the value of 80% (sometimes 90%) of your outstanding invoices. As this is a line of credit, the amount you can borrow grows in line with the accounts receivable ledger of the business.

To apply with Earlypay, you will need at least $50,000 in outstanding invoices with other Australian businesses, and total borrowings can go all the way up to $15,000,000. You will also need to regularly invoice after goods or services are delivered and have an ABN or ACN. Invoices must be under 90 days from the issue date.

If you meet these requirements, then the chances of approval are high. This is because funding is advanced against the outstanding invoices, which provide the collateral that Earlypay requires. For this reason, interest rates are lower than unsecured business loans and suitable for start-ups.

Interest rate costs range between 4.95% and 11.95% per annum and may also have drawdown fees. If you choose an invoice factoring rather than discounting arrangement, then collections management fees will also apply.

You will know in 24 hours if the finance is approved, and receive funding 24 hours following approval. To streamline the process you can connect your Xero or MYOB AccountRIght accounting software to the Earlypay platform for easy account management.

 

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  • Loan Type: Invoice Finance (line of crredit)
  • Loan Amount : $50,000 to $15,000,000
  • Loan Terms: 80%-90% of invoice value in advance
  • Min. Revenue: Outstanding invoices with other Australian businesses
  • Min. Trading: (Startups ok)
  • Unsecured?:
  • Credit Score: No
3Waddle

Recently purchased by accounting software giant Xero, Waddle specialises in revolving accounts receivable lines of credit. This means you can access a credit facility of up to 80% of the value of outstanding invoices. These funds you drawdown will be delivered within 48 hours.

What makes Waddle unique is that they are a cloud-based invoice finance platform which allows businesses to set up and maintain their credit facility without the need for paperwork and to contact lending specialists. By automating the invoice finance process, business owners can access finance on an as need basis, exactly like a line of credit.

Credit limits will vary in line with the unpaid invoices you have, meaning they increase and decrease as invoices open and close. To make the invoice finance process easy, the Waddle platform integrates with accounting packages such as Xero, MYOB, and Quickbooks. Waddle then uses the information available in these accounting products to assess how much they will advance. This means you never need to send Waddle invoices.

To get started with Waddle, your business needs at least 6 months of trading history, you have at least $10,000 in unpaid invoices and you invoice other Australian businesses.

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  • Loan Type: Invoice Finance
  • Loan Amount : $10,000 to $4,000,000
  • Loan Terms: 80% of invoice value upfront
  • Min. Revenue: $10,000+ p.m
  • Min. Trading: 6+ months
  • Unsecured?:
4Fifo Capital

Fifo Capital is a New Zealand lender with an international presence as they have franchises in Ireland, the United Kingdom, and of course Australia. In Australia, Fifo Capital has assisted over 3000 businesses of all types.

The main selling point with Fifo Invoice finance is the speed they can provide funding. Fifo Capital is able to provide 90% of funding into your bank account within 4 hours (with the remainder paid when the customer closes the debt). To access this funding, send your customer their invoice and then email the invoice to Fifo Capital with how much cash you need advanced.

Fifo is a good choice for selective invoices (spot factoring) since they accept single and multiple invoices. There are no lock-in contracts meaning you can fund as much as you need. Invoice values start from $5,000 and go up to $500,000 and do not require real estate security. Fifo Capital loans are recourse loans, meaning if the client does not pay their debt, you will need to buy the invoice back.

To qualify for invoice finance, your business should have an annual turnover of $500,000.

 

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  • Loan Type: Invoice Finance
  • Loan Amount : $5,000 to $500,000
  • Loan Terms: 90% of invoice value upfront
  • Min. Revenue: $5,000 (invoice value)
  • Unsecured?:
5Tim Finance

Formerly known as The Invoice Market and recently purchased by accounting software giant Xero, TIM Finance specialises in Invoice finance, trade finance, and supply chain finance.

To qualify with TIM Finance, your business will need an ABN, annual revenue of $1,000,000 and have at least 4 regular paying customers. Your business will also need accounts receivables of at least $100,000, to begin with, thereafter you can apply for working capital with invoices as small as $2,000 with a minimum total funding of $50,000 per month. You can borrow up to $5,000,000 at any one time.

TIM Finance appeal points include :

  1. Submit invoices and self-manage your cash flow needs via the TIM platform.
  2. The amount you can borrow directly correlates with your current receivables ledger at all times. In this sense, TIM Finance ‘cash flow loans’ works like a line of credit.
  3. TIM Secure Debt Protection mean finance is non-recurring. Should the debtor go into administration and default, insurance will cover the debt.
  4. Choice of full ledger or spot factoring
  5. 80% of selected invoices can be funded within 24 hours with the balance when the client pays 3-45 days later.
  6. Discounts fees – the more you use TIM Finance, the lower your fees. No hidden fees or application fees.
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  • Loan Type: Invoice Finance
  • Loan Amount : $100,000 (initial) $2,000 per invoice thereafter (min. $50,000 per month)
  • Loan Terms: 90% of invoice value upfront
  • Min. Revenue: $1,000,000 p.a
  • Min. Trading: 12 Months
6Swoop Funding

Swoop funding is a platform that uses matching technology to connects SME businesses with suitable options for finance. Funding options are not just limited to invoice finance by other types such as supplier finance, asset finance, business loans and bank overdrafts.

The main advantage of the Swoops platform is that it removes the difficulty business owners have with funding the right finance for their needs. Instead of spending our googling and researching the market for suitable lenders, Swoop finance does all the work for you.

Swoop’s platform integrates important data points such as bank accounts and accounting software to identify key business metrics. This allows Swoop to determine your debt/service coverage ratio, a critical measure for your businesses ability to pay a loan. This ensures Swoop will not suggest financial options you should not be applying form

As Swoop is a kind of lending place, there are no specific eligibility requirements. To get a loan, you just need to provide your funding requirements, your annual turnover and age of business. You can get up to 95% of the value of unpaid invoices (up to $9 million in total) with variable credit terms.

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7ScotPac

Scottish Pacific (ScotPac) is an invoice finance specialist but also offers other solutions such as trade finance, asset, and equipment finance. Among ScotPacs suite of invoice finance products, clients can choose between factoring, discounting, selective invoice factoring (spot factoring), progress claims finance, and supply chain finance.

If you choose traditional methods of invoice finance with Australia’s largest non-bank lender, you can receive an advance of up to 95% of the total invoice value upfront. This advance will be paid within 24 hours with the remaining 5% when the invoice is paid. Your only qualification criteria are that invoices use standard ard credit terms.

You should keep in the mind the type of invoice finance you obtain. Invoice and spot factoring cost more than discounting. This is because of the debt collection and account management services ScotPac will need to manage with factoring.

If your business has a contractual-based arrangement and you invoice as each deliverable is completed then progress claim finance may be better. With this finance, you can claim up to 70% of the invoice value upfront with the remaining 30% when the customer closes the debt.

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  • Loan Type: Invoice Finance (Factoring or Discounting), Selective Invoices
  • Loan Amount : $10,000 to $150,000,000)
  • Loan Terms: 95% of Invoice value upfront
  • Min. Revenue: $200,000 p.a
  • Unsecured?:
8Valiant

Valiant Finance has a focus on helping Australian businesses find the best finance provider by connecting you with over 80 leading lenders. By providing Valiant finance with some basic details about your financial requirements, the lending broker is able to use their extensive network to find you the right lender.

The advantage of using Valien finance to find the finance for your business, you can save time as you don’t need to do the research yourself. Valient will provide you with a list of suitable lenders within minutes so you can compare and makes a decision in quick time. Once you decide on a lender, expect Valiant to come back to you in 24-48 hours with a lending arrangement.

As Valient is a lending marketplace, there are no specific requirements but all types of debtor finance are available including invoice factoring, invoice discounting, and spot factoring. You will find interest rates start from 7% per annum.

To be eligible to apply, your business must have a turnover of $200,000 per year and have been trading for at least one year.

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  • Loan Type: Debtor Finance (Discounting, Factoring)
  • Loan Amount : Up to $1,000,000
  • Loan Terms: Up to 80% of invoice value
  • Min. Revenue: $200,000 p.a
  • Min. Trading: 12+ months
  • Unsecured?: Unsecured?
  • Credit Score: Profitable and creditworthy

What Is Invoice Finance / Debtor Finance / Account Receivables Finance

There is no doubt, working capital is the lifeblood of any business since, without it, your business cannot function. For this reason, invoice finance is one of the most popular forms of business finance. All businesses have expenses to pay and sometimes it can take time for these businesses to pay their invoices. This is where invoice finance comes in.

Invoice financing is a type of short-term loan that allows your business to receive a cash advance for unpaid invoices for products or services delivered. These invoices act as a form of security until the invoice is paid off, meaning your business can get immediate cash funding. Sometimes you may hear the term debtor finance or account receivables finance, these are just another term for invoice finance, there is no difference.

Waiting for clients to pay their bills, means your business cannot access these funds which can lead to cash flow concerns. Invoice finance solves cash flow problems by giving immediate working capital without needing to wait for 30 to 120 days for the invoice to be settled. This allows your business to focus on other expenses such as growing the business, payroll, and other debts.

A step by step example of invoice financing

  1. Your business sells a good or performs a service to client (or buyer)
  2. To recoup funds owing, your business issues an invoice to the buyer. These invoices have 30 to 120 day payment terms for the client to settle in full.
  3. Since your business is not in a position to wait until the buyer clears the invoice, you ‘sell’ the invoice to a lender
  4. The lenders effectively buys the invoice or holds the invoice as security and gives your business a cash advance. This advance will usually be 80% of the value of the invoice less a factoring fee.
  5. WIth invoice factoring, the lender will then be responsible for collecting the funds from the buyer. With invoice discounting, your business will be responsible for the collection of outstanding invoices.
  6. When the buyer has honoured the debt, your business will receive the remaining 20% of the invoice amount minus fees.

Types Of Invoice Finance can include:

Invoice Factoring / Debt Factoring

With invoice factoring, your unpaid invoices are sold to an invoice factoring company for a percentage of the value of the invoice. In return, your business receives about 80% to 85% of the value of the invoice (minus fees) with the remainder once the invoice is closed.

The key distinction that separates invoice factoring from other forms of invoice finance is that the lender is responsible for following up with the client for payment.

Handing over the responsibility of collection payments to the finance provider saves costs and time from your end. Having the factoring company be responsible for managing your account receivables ledger means you need to devote less staff and time to this exercise.

While there are benefits in outsourcing the collection of invoices, it can have a negative impression on your customers. You don’t know how the lender will conduct themself around your clients and it can also lead the client to think your company is financially unstable. Removing the personal element of invoice collection can damage good business relationships.

Invoice Discounting / Debt Discounting

This is exactly the same as factoring, except this time, it is your business that is responsible for the collection of invoices and account receivables.

Since your business will be responsible for the account receivables, interest rate costs can be lower since the lender does not need to manage the invoice collection. With this in mind, invoice discounting is most suitable for businesses with an accounting or finance department to manage this.

Sometimes called confidential invoice discounting, this type of cash advance allows you to keep your relationship with finance providers discrete. This means your client will never know about your debts.

Accounts Receivable Line of credit

This is basically invoice discounting with a business line of credit replacing the cash advance. In other words, instead of receiving a lump sum amount as would occur with invoice discounting, you have access to an invoice finance facility that allows you to draw only the capital you need up to the value of the accounts receivables.

Like with other methods of invoice finance, you are using the unpaid invoices as collateral in return for capital. You are then charged interest on the amount you withdraw from the credit facility.

Like with invoice discounting, you maintain ownership of the invoices, meaning you will need to follow up with clients for payment.

Types of Factoring

Recourse Factoring

Recourse factoring places the risk on the borrower (you!) in the event the client does not honour the invoice. If this happens, you will need to buy the invoice back from the invoice factoring company and then follow up with the client for the bad debt.

Non-Recourse Factoring

If the invoice financing company allows invoice finance without recourse, this means they are taking on full liability should your customer not pay their debts.

This type of factoring is not usually available with factoring companies as they don’t wish to take on the risk. Consequently, fees are higher than with recourse factoring so you would only want to use this if you doubt the ability of the client to pay the invoice.

Factoring Facility

Invoice financing companies prefer to deal with businesses that have regular invoices. This allows them to set up an invoice finance facility where you can lodge invoices on a weekly, monthly, or other periodic basis.

Spot Factoring

If you do not have regular invoices, then you will need to find a lender that accepts spot factoring. Spot factoring is another term for single invoice factoring, and because they are one-off, they have higher costs.

Whole ledger factoring

This is the opposite of spot factoring, with whole ledge factoring, the factoring will require you to sell all invoices to the factor for a particular company.

Businesses that invoice financing is suitable for

The main purpose of invoice financing is to ensure your business can maintain cash flow until invoices are cleared. It, therefore, follows that invoices are best for the following types of businesses:

  • Businesses with regular invoices and large invoices
  • Businesses with seasonal revenue
  • Businesses with long billing cycles
  • Clients that export services (export finance)
  • Businesses that have clients with reliable payment history

Small businesses commonly have a genuine business need for invoice finance to manage cash flow issues. As a business owner, you will need to deal with limited funds, which can make it difficult to manage your business while you wait for repayments. Invoice finance is there a good finance solution until payments are made.

Advantages of Invoice Finance:

Invoice finance is a good funding option in the following circumstance:

  • You have unpaid invoices and need to maintain cash flow
  • You need a flexible finance option: Invoice finance grows and shrinks in line with the invoices you have,
  • Factoring allows you to outsource your account reconcilables
  • Invoice acts as the collateral so no need to own assets
  • Easy eligibility: Compared to other types of business loans, barriers are low
  • Interest rates or costs are reasonable as ln clients do not make late payments
  • Your business does not a strong credit score (though your clients may need good creditworthiness)

Disadvantages of Invoice Finance

  • May not be the best financing option for all businesses: Your business needs to have a billing model of invoicing and receiving payments via electronic transfers. A business that pays via cash or credit cards may accept by an invoice financing company.
  • Invoice fees can add up: late payments and long payment terms can result in larger than expected fees.
  • Customer may not pay invoices or pay late: If the client does not pay their invoices, then your business will need to pay the debt. This can harm the business credit score if you are unable to do so.

Is your business eligible for Invoice Finance?

Invoice finance is one of the easier types of finance to obtain since unpaid invoices can act as collateral. In Australia, you will need an ABN or ACN and invoices above a certain value. Like with other loans such as unsecured business loans, the lender will consider your business credit score, length of time in business, and financial history however they may not place as much importance on these factors.

Lastly and unique to invoice financing, your business should also have customers with a strong payment history and you should expect that the lenders will perform a credit check on these customers.

Application Process

Applying for Invoice finance is one of the easier forms of finance to set up. As the invoice acts as security, you will not need to take on debt. This means your business will not need to go through a thorough application process and appraisal process that most other types of finance will require.

  • The actual application process usually only requires a few basic details including:
  • ID Documentation
  • A list of your customers / debtors (companies who owe you money)
  • Access to your accounting system (Xero, Reckon, MYOB, etc)
  • Copies of invoices you want to factor
  • Financial Statements
  • Invoice guarantee (for invoice discounting)

It will usually take 3 to 5 days for the initial application but once the factoring company approves your application, you can begin factoring your invoices immediately. This means you can receive finance for the invoices within 24 hours.



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