Many businesses have just enough cash flow to keep going through the month. While theyre not running low on cash, they also dont have the funds they need to expand the business. Many times, their cash is stuck waiting to be paid through invoices and may not be paid in time for them to purchase the products needed to expand their business. Traditional business loans may not be easy to obtain based on their cash flow, but they do have other bank invoice options.
One of the most common debtor finance solutions is to acquire a loan based on their invoices. A company will pay the invoices for them and when the invoice is paid by the person who actually owes them, they can repay the company they obtained the loan from. This gives the business the money they need right away instead of them being forced to wait until the invoice is actually paid. In most cases, invoice finance perth is easier to obtain than a traditional loan since the business has the invoice as collateral. Since the invoice is what is being used, the company knows they will be repaid the money. This is known as factoring with recourse as the business will be responsible for repaying the money even if the invoice is not paid.
In some cases, the business may not even need to get a loan for the invoices. Instead, they can sell the invoice to a third party who will then collect on the invoice when its due. The business then has the money they need, minus fees, and wont have to worry about repaying the money when the invoice is paid. This is called factoring without recourse and the company that purchases the invoices is the one who may incur a loss if the invoice is not paid. Its all handled by the company that purchases the invoices. Most of the time, the business can get a loan on or sell multiple invoices to get the money they need to help expand their business.
A business who doesnt have the needed capital to grow their business, yet does have a positive cash flow, can get the money they need through debtor finance solutions. Whether they choose to get a loan on invoices, sell their invoices, or another option, they will be able to get the extra cash they need. They can then use the cash however they would like to help expand the business. Any company can look into these resources to find out if theyre eligible even if they wont be eligible for traditional bank loans.