Invoice Financing and Factoring
With Invoice Financing and Factoring, a company is able to use its unpaid invoices that are in past due status or current as ready funds. It is an ideal solution for businesses that need finance solutions that are secured by unpaid debts rather than physical collateral. A lender extends a line of credit equivalent to an agreed upon percentage of the company’s account receivables with interest charged on funds withdrawn from the line of credit.
Invoicing or Factoring?
What is the basic difference between invoicing and factoring? The difference is in the terms of the facility and the role the lender plays in the management of the debtor’s book. In factoring, a lender allows the business to use up to 85% of the total sales ledger and takes charge of collecting from clients with outstanding invoices to streamline repayment. In invoicing discounting, the lender does not control the sales ledger and the business takes charge of collecting payments from its clients and makes lender payments. Clients are not made aware of the arrangement with the lender.
Factoring is ideal for the business if the company is not sure about successful collection of debts. This facility is recommended for small businesses to minimise the burden of collection. Invoice discounting is ideal for bigger companies with adequate debt collection systems. This facility may entail extra charges for ledger management and can be a cost efficient solution for a company with the ability to make independent repayments.
You don’t need to struggle with financial obligations if you have clients who owe you money. You can secure funding against unpaid customer invoices with invoice factoring or discounting. Find out how you can use funds tied up in debts for your working capital with the best financing and cash flow solutions in Australia.
Call us now at Truck Insurance HQ on 1300 815 344 for a no-obligation and risk free solution to your funding needs.