As a small business owner or freelancer, you depend on cash flow to keep your business running smoothly. Cash flow is king, and it can be incredibly frustrating when you have clients that owe you money.
Unfortunately, late payment on invoices is a common problem for small businesses and freelancers in Australia and New Zealand. In fact, one study from accounting firm Xero discovered that 30% of invoices for small businesses were paid more than seven days late during a two-year period.
If you’re like some entrepreneurs, you’ve considered applying for a working capital loan just to fill in the gaps until your clients pay you. The process of applying for a loan is time-consuming and cumbersome and results in long-term debt on your balance sheet.
There’s another option you may not have considered, known as invoice financing, which can give you the temporary boost to your cash flow that you need, without any lasting debts or commitments.
What is Invoice Financing?
Invoice financing is a fast, trustworthy, and simple alternative to traditional bank lending. Essentially, invoice financing enables you to borrow money against the value of customer invoices.
When you use invoice financing, you sell your invoices to the invoice financing provider, which then immediately pays you. Your client then pays the invoice finance provider directly. On-demand invoice finance allows your clients to pay you directly (as they normally do) and then you repay the provider by direct debit once they have paid.
These are the main types of invoice financing to choose from:
- Invoice finance (sometimes referred to as invoice discounting): When you use this service, you sell your invoices to the provider. You can then draw down cash against the total amount of your invoices. Your clients often won’t know you needed to access the financing option. Your client will pay the invoice finance provider directly, along with the transaction fee.
- Factoring: Invoice factoring means that you’ll sell your invoices and receive cash, but the company you sell the invoices to will also collect payments from your clients. This can be a good option if you have a lot of unpaid invoices and lack the resources to pursue collections.
- On-demand financing: This type of invoice financing is also the most flexible option, allowing you to choose which invoices to finance — either several or just one at a time, whenever you need it. Another big advantage is your customers pay you rather than the invoice finance provider. Once paid you repay the provider automatically by direct debit.
Invoice financing is a great solution for short-term financing needs. Check out some of the major benefits that our customers enjoy:
- Quick access to cash. That means you’ll get access to working capital fast, enabling you to pay your vendors and employees, avoid late fees, and run your business.
- Opportunity for quicker growth in your business. You can focus on growing your company because you now have access to hard-earned funds. You don’t have to put your expansion plans on hold while you wait to collect invoices. As a bonus, you’ll also be able to take on bigger projects without worrying about when you’ll get paid.
- Easy to link to accounting software. Your provider will automatically track payments and fees against the invoice that’s being financed. Essentially, the bookkeeping work takes care of itself.
Why It’s Better Than a Bank Loan
Compared to a bank loan, invoice financing is faster, easier, and if used prudently a cheaper option. Applying for a bank loan can take weeks, during which you’ll need to fill out mountains of paperwork and face strict approval hurdles. You’ll have a maximum amount you can borrow. In a best-case scenario, the bank funds your loan, but you now have fixed-term repayments every fortnight that can also present another kind of cash flow problem.
When you use invoice financing, the approval process takes a few days. But with On-demand Invoice Finance it can take just a few few minutesto sign-up — and you can often receive money the same day. There’s also no long-term debt or cap on the amount you can borrow – as your invoices grow your ability to borrow against these invoices grow.
How it Works
We created FundTap to make the process of invoice financing even easier for our customers. In just seconds, you can create an account and submit your first invoice. Here’s how it works:
- Create a free account, link your accounting software and select one or more of your outstanding invoices.
- Following a short approval process, FundTap will review and approve the invoices you select and send payment electronically.
- Once your customer pays, you repay FundTap via direct debit (you can move the direct debit date if your customer pays late).
Our fee starts as low as 4% of the invoice value. We don’t have any sign-up fees, administration fees, documentation fees, early repayment fees, monthly or annual fees. The only fee you pay is for the funding you receive. You are in control of the costs.
To ensure you can make the right funding decision, we show you the cost before you decide to go ahead. We have a handy funding and fee calculator here.
Why Choose FundTap
At FundTap, we’re constantly working to meet the needs of small businesses. We aim for a simple, painless approval process and a quick turnaround. We know how important cash flow is to our customers, which is why we work to get money in customers’ hands as soon as possible.
Your clients never have to know that you’re using an invoice financing service to meet your cash flow needs. You can use FundTap as often as you need, with no contract.
Here’s what our customers have to say:
“FundTap has enabled us to grow relatively quickly. If we waited for traditional lending, we would’ve been 6-7 months behind where we are now. It’s relieved a lot of mental stress for me, allowing us to have a safety net to grow our business, gain more customers, and keep on top of our supplier payments.”
-Pranav Maharaj, founder of Outre Clothing
“We are able to achieve scalability more easily with FundTap, making cost savings when ordering larger volumes of ingredients, and having capital available for huge packaging runs with long lead times.”
-Sarah, Co-Founder of YUM
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