Managing cash flow effectively is one of the most important parts of being in business. Even in a strong business environment where SMEs have strong revenue growth, cash flow can get locked up in invoices awaiting payment. According to Xero, businesses have to wait an average of 23.5 days to get paid, and almost 40 per cent of invoices are paid late. Late payments can make it difficult for SMEs to meet ongoing expenses, pay suppliers, and invest in growth. Unlocking debtor funds can provide the cash flow boost businesses need to grow, even in challenging economic times.
Debtor finance frees up the capital locked up in customer invoices, significantly reducing the cash conversion cycle. Not only does this allow for stronger cash flow management, but it’s a flexible funding option that doesn’t require the burden of personal collateral and other complicated steps that traditional lenders require. This article outlines how debtor finance can boost business growth. Keep reading to learn more.
Debtor finance allows SMEs to realise the full value of customer invoices without waiting for the customer to make payment. By receiving an advance on debtor invoices, SMEs don’t have to wait for invoice payment before using the cash to deliver goods and services, pay suppliers, pay for other expenses, and invest in growth. Without debtor finance, companies have to wait for customer invoices to be paid for cash flow. This means a business holds all of the financial risk until the invoice is paid. In contrast, the debtor finance provider assumes the financial risk of customer invoices the moment the advance payment is made.
The key advantage of debtor finance is that it gives SMEs more control over their cash flow. And with stronger cash flow provided through advance payment from the funder, businesses have the capital they need to cover their expenses and the peace of mind to invest in growth too. Investing in growth could look like anything from opening other physical locations, expanding to new markets, placing bulk stock orders, or developing new products and services. Whatever an SME’s growth goals are, debtor finance unlocks the cash flow needed to make those goals a reality.
Debtor finance allows SMEs to receive up to 100% of the value of customer invoices as soon as they are raised. Once received, these funds can be used for anything, from covering expenses to investing in growth. The fact that the funds received through debtor finance in a business can be used for many purposes provides the flexibility that SMEs need.
Let’s consider an example: Boosting cash flow to place larger stock orders.
If a company can get a cheaper rate on supplies by placing a bulk order but doesn’t have the extra capital, debtor finance can be used to fund the order. Once the cash is received, the business can place a bulk order. This allows the business to realise the full value of customer invoices by boosting cash flow, reducing the cost of inputs, and increasing margins — all important factors in an inflationary environment.
Late payments are commonplace amongst Australian businesses, with most companies waiting an average of an extra 6.6 days to get paid once an invoice is overdue. Debtor finance takes the guesswork out of cash flow management by helping businesses to secure up to 100% of the invoice amount as soon as it is raised. Whether a business is looking to bridge cash flow gaps or extra capital is needed to take advantage of growth opportunities, debtor finance unlocks cash flow and provides the resources that SMEs need to grow.
Moneytech’s debtor finance solutions give SMEs the capital they need to grow with up to 100% per cent of the face value of invoices received once they are raised. With limits between $250,000 and $25,000,000 and 120-day recourse periods (30 days longer than the industry standard), enjoy flexibility and peace of mind knowing that the cash needed for growth is only an invoice away. Further, Moneytech’s pay-as-you-go structure means you only pay for what you use, with the ability to scale the facility to your business’s needs as they change.
Moneytech makes accessing the cash flow required for growth simple and efficient. Whether your business is looking to release capital from customer invoices to cover regular expenses or you want a cash flow boost to fund your next growth phase, we can help. Contact us today, and one of our experts will be in touch to discuss your options.
This article is for information purposes only and does not constitute financial advice. You should speak to a qualified finance professional about your unique situation before making any decisions about financial products.