Don’t use the equity in your home to keep your business open – Use debtor financingMar 18 2018 in Debtor Finance
Small businesses are being forced to take loans using the equity in their home in order to keep their business afloat. Loans taken out against property are used to pay wages, sustain cash flow and keep businesses operating. But this can put a huge strain on the business owners and put them at serious risk of losing everything. When you take a loan out against your house then you risk losing your home if your business fails.
Equity drawings from residential properties for business purposes have increased by over 50% over the past 6 years. This is putting properties in the firing line and business owners at risk of losing it all. Instead of using equity loans there is another option, debtor financing. Debtor financing can be used to improve your business cash flow without needing to draw equity from your home.
What is debtor financing?
Debtor financing uses the amount of money owed to a company as collateral. It allows you to turn your accounts receivable into cash. Effectively this form of finance allows you to access funds that are not yet available to you because they have not yet been paid. This is great for maintaining a constant cash flow as you can access this cash sooner, allowing you to repay it when your client pays.
Typically, you can get up to 90% of the invoice value within 24 hours, allowing you to overcome your cash flow problems quickly and easily.
How does debtor financing work?
Debtor financing is a means of funding small and growing businesses that need working capital so that they can operate. It allows you to finance against slow paying invoices and help you to overcome cash flow problems by following 3 simple steps:
1) Invoice your clients for sales of goods or services and send BCashflow Positive a copy.
2) BCashflow Positive will verify with your client that the goods have been delivered, or services have been fully rendered, before releasing up to 90% of the invoice value.
3) The remaining 10% is provided to you once your client pays us, less any accrued fees.
How do I qualify for debtor financing?
Debtor financing is suitable for small to medium businesses with a high level of customers on accounts and has a monthly turnover of $200,000 to $3,000,000.
How much does debtor financing cost?
At BCashflow Positive we are transparent about fees so that you will know how much it is going to cost from the outset. Debtor financing costs will vary depending on the invoice amount and how long it will take for your client to pay the invoice. For example, on an invoice of $200,000 which is paid 30 days after it was funded will incur a fee of 1.8%. Give our fee and funding calculator a go to work out how much funding you can get and how much it is going to cost.
What are the benefits of debtor financing?
Debtor financing allows you to solve your cash flow problems by releasing immediate cash from your receivables. These problems could otherwise lead to your business being unable to operate and this can ultimately cost you your business. Debtor financing does not require real estate collateral either, which means that you do not need to use the equity in your home to pay for your business operating costs.
Apply for debtor financing with BCashflow Positive is quick and simple. Our online application takes 3 minutes to complete and a response is provided within 24 to 48 hours. Unlike traditional business loans, or loans to draw equity from your home, which can take weeks to months to get a response.
Beware Of Flex CommissionOct 25 2017 in Debtor Finance
When it comes to choosing a finance broker for your business, it’s important to consider what incentives they are getting as part of the transaction. Good finance brokers are like trusted advisers to their clients, where they have taken the position of the traditional bank managers of 20 years ago. Some brokers might be swayed and not necessarily have their client’s best interest at heart, particularly where flex commission can be applied.
What is flex commission?
So, what is a flex commission system and why is it so important to be cautious of finance brokers who might be involved in one? In the most basic terms, a flex commission is where the amount of commission is dependent on the interest rate charged to the consumer. The higher the rate, the more brokers can make.
The new legislation from the Australian Securities and Investments Commission to be introduced in November 2018, prohibits lenders from entering into agreements where the benefits paid to a broker are determined by the interest rate, and the broker can set or influence the rate. The instrument will also place controls on fees charged by brokers, which are designed to stop brokers from increasing their fees and charges to make up for any loss resulting from the ban on flex commission. The ban will apply to all regulated credit contracts and consumer leases, excluding home loans.
Although there are new laws being introduced that aim to halt this practice, as things stand, flex commissioning is still a very real issue that needs to be considered carefully by you or your company before choosing a finance broker.
Reliable debtor factoring company
Whilst we do pay brokers incentives here at BCashflow Positive, we certainly do not enter into any agreements where there is flex commission involved. We also don’t take brokers on fancy holidays to try and sweeten the deal. Our core focus is providing flexible and transparent debtor factoring to Australian businesses by unlocking cash from their sales invoices.
How does debtor factoring work?
BCashflow Positive’s debtor factoring facility can provide immediate working capital for your business by unlocking the cash tied up in your sales invoices. Getting your invoices paid within 24 hours is as easy as 1 2 3:
1. Invoice your clients for the sale of goods or services and send BCashflow Positive a copy.
2. BCashflow Positive will then transfer up to 90% of the invoice value to your nominated account within 24 hours.
3. The remaining 10% is credited to you once your client pays, less any accrued fees.
How much does debtor factoring cost?
We are transparent about fees from the start, so there are no surprises. We charge 1.8% for the first 30 days and 0.06% per day thereafter for up to 90 days. Give our online fee and funding calculator a go now.
Who does debtor factoring suit?
Companies with a high level of customers on accounts with a monthly turnover of $200,000 will benefit from using a debtor factoring service. Rapidly growing companies or newly established companies can also benefit from using debtor factoring to convert their sales invoices into immediate working capital.
Don’t wait up to 90 days for your clients to pay, unlock growth by unlocking cash from your accounts receivable.
Call 1300 937 292 to speak to a debtor factoring expert today.