A Guide to Invoice Factoring

Running a business of any size can be a daunting task. With such a large amount of things to focus on from keeping clients happy to managing the payroll expenses, why would you worry about cash flow problems when you don’t have to? That’s where invoice factoring comes in. It’s a quick and easy way to receive the cash you need to keep operating at optimal levels.

 

As one of the leading business financial factoring experts, the team from Selectpay has collected this insightful guide about it here!

 

How Does it Work?

 

Before diving too deeply into the benefits and costs of invoice factoring, it’s important to understand precisely how it works. Essentially, it’s when you’re paid money upfront from a third-party company for your unpaid invoices. It’s then the company’s responsibility to collect them and recoup their investment once they’re due.

 

How is Invoice Factoring Used to Boost Cash Flow?

 

When it comes to operating your business on a daily basis, you need to have a steady flow of cash coming in, as well as going out. Of course, an influx of the former is always preferable. Invoice factoring can help you improve your cash flow and pay for those daily expenses in a multitude of different ways including:

 

  • Providing the capital needed to buy new equipment
  • Enabling your business to invest in advertising and marketing plans
  • Making it easier to purchase product materials from vendors
  • Allowing you to increase your inventory and boost profit margins and sales
  • Making collecting unpaid invoices more efficient
  • Giving you the cash you need for monthly financial obligations (rent, utility bills, etc.)
  • Delivering the stability needed for hiring new employees
  • Helping your business maintain payroll payments each month

 

What Does Invoice Factoring Cost?     

 

Depending on the terms of the agreement with your invoice factoring company, the cost can vary and is a percentage of each unpaid invoice, ranging on average anywhere from two to ten percent. However, many invoice factoring companies will pay you back a portion of this percentage once the invoice has been paid. There are two components to calculating the cost of invoice factoring which include the discount rate and factoring period. The discount rate is how much the company takes from each invoice and the factoring period is the amount of time your customers are allowed by the company to keep their invoices open.

 

Contact us today for invoice factoring and buy now, pay later solutions!

 

Learn more about invoice factoring and buy now, pay later for businesses by contacting us online today or calling 1300 566 229.

5 Business Financing Solutions & When to Consider Them

When it comes to cash flow for your business, there are always ebbs and flows due to various factors. However, if you experience something more drastic it may be time to consider some business financing solutions to help you balance things out again.

 

There are numerous options out there, which is why the team from Selectpay has collected the top five for you here!

1. Convertible Debt Financing

 

Much like it sounds, convertible debt financing is when a group of investors chooses to offer financing to a business with the expectation that eventually, that debt they’re paying off will be converted into a financial profit that they will recoup.

 

2. Invoice Factor Solutions

 

Another great finance option for small businesses or growing enterprises struggling to maintain a smooth cash flow is invoice factor solutions, which is a fast and easy way to receive the cash you need as soon as possible. Invoice factor companies provide you with cash based on your outstanding invoices, which are used as collateral until they’re paid.

 

3. Partner Financing

 

This form of financing solution is when your business works in tandem with a strategic partner, often another similar business in your industry willing to invest in your company. Of course, in return, you’ll need to provide your strategic partner with a portion of the sales, distribution rights, or other assets depending on the circumstances of your arrangement with them.

 

4. Crowdfunding

 

Although it might seem a little out of the ordinary, crowdfunding can be a viable option for some businesses looking to boost their bottom line. However, it’s most often used for newer businesses that want to hedge their bets and take a minimal amount of risk when exploring their financing options. Many crowdfunding platforms enable businesses to raise money and also provide incentives for investors as well.

 

5. Microloans

 

For businesses that need money fast, microloans can be a good option and range anywhere from $2,000-250,000. They’re meant to cover a business’s daily operating expenses like supplies, furnishings, and the equipment necessary to operate a specific enterprise. However, microloans often come with stipulations and restrictions on how the funds can be used.

 

6. Payment Solutions

 

Payment solutions such as buy now pay later, deferred payment terms, and cashflow finance solutions can help you get paid quicker while spreading out the cost of your own supplier invoices. Additionally, you can also offer such solutions to clients so that you get paid in full, on time, and they can pay in terms that suit them.

 

Contact us today for business financing solutions!

 

If you’re in need of improved cash flow ASAP, Selectpay can help. We also offer invoice finance services and buy now, pay later solutions for vendors and B2B businesses. So, contact us online today to learn more, or call 1300 566 229 to speak to an expert.