- Who is Cashflow Recovery?
- Who can use Cashflow Recovery?
- What is Working Capital Funding?
- What is Invoice Financing?
- Who uses Invoice Finance?
- What are the fees payable for invoice finance services?
- What if I don’t want to finance all my Invoices?
- What Industries use Invoice Financing and are serviced by Cashflow Recovery?
- What other services does Cashflow Recovery offer to improve Cashflow?
Who is Cashflow Recovery?
Westbridge Securities Pty Ltd T/A Cashflow Recovery is a professional finance broker service (Authorised Credit Representative Number # 492799) that offers a range of services and solutions to individual and business’s to solve finance and cash-flow problems that affect them. In one of the areas Cashflow Recovery works in is that it matches the right funder to your business. Our understanding of the various property finance, working capital, debtor finance facilities, invoice finance, supply chain finance and payment systems, short term SME lending facilities being offered through private funders and lenders, ensures you receive the right facility to match your costing requirements as well as your future growth plans. Cashflow Recovery hold Accredited Introducer status with a number of private funding groups, payment services providers and Mortgage Australia Group Pty Ltd (Australian Credit License No: 377294). Where credit or loan services are required these are provided via Mortgage Australia Group.
A finance facility that is properly matched to your specific business requirements will often improve funding availability and will also improve real cost per finance dollar.
Who can use us?
Any individual or couple who want a home loan, any business needing a loans or any business with an Australian Business Number (ABN) that is supplying goods or rendering services to other Australian businesses. Call Simon McGrath on 1300 885 244 to check whether your business is eligible. Or contact us on firstname.lastname@example.org
What is a mortgage?
A mortgage is simply a debt secured by a registered charge over real estate. It is a legal obligation by the borrower (mortgagor) to pay the the lender (mortgagee) a certain amount of money on stipulated terms and conditions. A mortgage is registered in the Land Titles Office and cannot be removed other than with the consent of the lender or by a court order.
What’s the difference between a Principal & Interest Home Loan and an Interest-only Home Loan?
Principal & Interest means you make repayments against both the original amount borrowed (‘Principal’) and the interest charged. Interest-only means that you only make repayments to meet the interest charged (often for an initial period at the start of your loan). You should consult with a financial advisor to determine which option best suits your individual requirements and objectives.
Why would I take out an interest only loan?
Usually investors and borrowers choose interest only repayments to maximise the benefits of negative gearing; that is tax benefits. With interest only repayments you do not pay off the principal amount borrowed during the term of the loan. The whole of the principal amount is repaid at the end of the loan.
What’s negative gearing?
This is where you have borrowed money to invest (such as buying property) and the income from an investment property (like rental payments) doesn’t cover its costs (such as mortgage payments). Get in touch with your accountant or financial advisor to find out more.
What is Working Capital Funding?
Working capital is the money needed to fund the normal, day-to-day operations of your business. It ensures you have enough cash to pay your debts and expenses as they fall due, particularly during your start-up period. Very few new businesses are profitable as soon as they open their doors. Working Capital can be sourced from savings, external investors, mortgages, home equity, business equity, inventory, issued tax invoices. Cashflow Recovery works with business owners to source a suitable solution to working capital.
What is Invoice Financing?
Also known as “Invoice Discounting”, “Single Invoice Discounting” or “Spot Factoring”, invoice financing is the sale of an asset (the unpaid invoice) at a discount to the face value of the invoice to create Cashflow. Whilst the name implies the sale of a single invoice, you can elect to sell one, multiple or all your invoices. The choice is yours.
Businesses use invoice finance to release cashflow from their Debtor Ledger rather than waiting for their customers to pay them. These funds are then used in the running of the business. Invoice finance is priced using a “Discount Rate” determined as a % of the invoice value. It is the same concept as offering a customer a 5% discount if they pay the invoice quickly and it allows businesses to obtain an advance of up to 80% of the invoice value without being contractually committed to factor every invoice as occurs with traditional factoring products.
Invoice finance is on revenue account and therefore accounted for through the Profit & Loss of the business, whereas factoring facilities are a debt facility and are a liability on the Balance Sheet.
Invoice finance provides greater flexibility and enables you to sell a single or a bundle of invoices when needed, without entering into lengthy and potentially expensive contracts.
Whereas Invoice Finance is the sale of an asset, (being the unpaid invoice), factoring is a debt facility secured against the value of the borrowers Debtor Ledger. Being a debt facility, the approval process to obtain factoring finance is significantly more onerous with rigorous lending criteria meaning many businesses may not qualify, whereas they may for invoice finance.
As a factoring facility is a Debt Facility the approval of the facility is therefore subject to the stringent criteria for approval of a debt facility. It also has ongoing criteria regarding debtor exposure limits and requires that every invoice issued by the business is factored. Furthermore even if an invoice is deemed “ineligible” – for example is over a Debtor exposure limit or issued to a non-approved Debtor – and therefore no funds may be drawn against it, the facility provider will still hold that invoice as collateral security against the facility.
In some cases, the lender may require property security as collateral for the facility.
What if I don’t want to finance all my Invoices?
That depends on your business and what it’s cashflow needs are.
If your business has a requirement to sell every invoice you issue every month, then a full factoring facility may be more appropriate for your needs. However, the beauty of invoice financing is the flexibility that it brings through the selection of invoices that you wish to raise cashflow against. With our Funder, there are no lock in contracts or debtor exposure issues.
At Cashflow Recovery we can guide you through the process to help you determine which type of facility suits you.
Who uses Invoice Finance?
Invoice financing is generally used by:
- Businesses in their early years as they may not meet the stringent lending criteria and are unable to qualify for debt finance such as a factoring facility;
- By businesses that are going through a growth phase that may only need to sell invoices for 6 – 8 months during the implementation of a new project for example and do not wish to take on debt and be locked into a 12-18 month contract to factor every single invoice;
- Businesses that wish to retain control of their Debtor Ledger but would like to access the value of their unpaid invoices;
- Where the business owners do not wish to offer property security as collateral against a debt facility;
- Invoice finance also quite often works in conjunction with a debt facility such as a factoring facility or a business overdraft.
As a guide to volume, in Australia for the quarter ended December 2013, invoice discounting turnover was $15.2 billion and factoring turnover was $1.5 billion.*
*Debtor & Invoice Finance Association Update – December Quarter 2013.
What Industries use Invoice Financing and are serviced by Cashflow Recovery?
Examples of Industries we service who can benefit from Cashflow Recovery services
- Building supplies – Wholesaler/Distributor
- Food – Wholesaler/Distributor
- Fruit and Vegetables – Wholesaler/Distributor
- Meat – Wholesaler/Distributor
- Confectionary – Wholesaler/Distributor
- Beers – Importer/distributor
- Wines – Importer/distributor
- Furniture – manufacturer
- Labour Hire Companies
- Property maintenance
- Agribusiness – Wholesaler/Distributor
- Printing services
- Commercial cleaning services
- Commercial catering company
- Defence force contractor companies
- Mining – machinery/equipment
- Subcontractors to established building companies
- Security Services
- Civil Engineering
- Subcontractors to Government
- Information Technology companies
How much will we get?
Typically, you receive up to 80% (but can be up to 90%) of the invoice value up front, in cash, and the balance of funds less the discount fee (which includes The Funder fee) when your customer makes payment of the invoice.
When are the fees deducted?
Generally the fees are deducted when your customers pay the invoice, however some facilities deduct fees from the initial payment when it is paid to you.
What are the fees payable?
Each Funder, Financier or service provider will charge a fee to establish the facility and typically an annual fees and a discount rate on each invoice.
These fees are advised to you before establishing a facility.
Sometimes a consulting fee is charged by Cashflow Recovery for consulting services.
What are the fees payable for invoice finance services?
Each service provider charges a different fee or fee scale. Cashflow Recovery can advise you on these during the assessment phase. The following should provide you a guide. Traditional factoring providers charge a base rate + a margin rate. In addition to a funds rate, full facility factoring provider may charge:
- An arrangement fee,
- A monthly service fee,
- Late payment fees,
- Debtor insurance fees,
- Liquidation fees,
- Audit charge-backs,
- Bank transfer and other administrative fees.
- Most facilities are legally binding for 12-18 months.
With Invoice Financing you only sell the invoices you want to sell, and there are no restrictive covenants or additional security required. There are no ongoing monthly service fees or unused facility fees. Where factoring does not accept certain invoices or may decline your application, once you and your debtor are approved, by posting the invoice on our Funders platform you should find a buyer keen to buy.
Cashflow Recovery can work with you to help you manage your Debtor Ledger to maximise the benefit and reduce the cost of cashflow funding.
How long does it take to access funds?
For a new client, it takes approximately 2 working days to assess your application to become an approved seller on the Funder. Once approved and you upload your invoice for sale, you set the auction time-frame for each invoice (we recommend 24 hours) and once you accept the winning bid, you will receive the agreed advance amount (typically 80%) by the next working day.
Is this process New?
No, in Australia for the quarter ended December 2013, Invoice Discounting turnover was $15.2 billion with over $63 billion for the full year.
What if the tax invoice is not paid by the client?
If you receive cash on a sold invoice from a buyer through a Funder, and your customer does not eventually pay the invoice, you will have to refund the amount paid to you by the buyer plus the discount fee for the number of days you have had the funds. The invoice sale is recourse to you in the event of non-payment by your trade debtor.
Is there are checking process on each Invoice?
There is a checking procedure that each Funder carries out prior to any invoice being funded. Not every company is accepted. There are significant checks for credit record, fraud, other debentures/charges/security given, sales terms and conditions, etc. Additionally, the Sellers invoices must be directly to a business debtor rather than to an intermediary or a consumer. We maintain strict adherence to Australian Privacy Principles. We will be happy to guide you through this process which is relatively quick and efficient.
What is the discount rate?
Most providers of single invoice funding charge fees from a “rate card” based on a sliding scale. In the Australian Market, they range from 5.5% to 11.0% of the invoice value and increase depending on how long it takes to collect the payment from the debtor.
Generally speaking the Funder does not use a “rate card” of discount rates as each invoice is individually priced ensuring highly competitive funding. You can expect to see discount rates significantly lower than other single invoice discounters because of the competitive platform provided by The Funder.
Importantly, Funders are looking at the size and strength of the invoice and both seller and debtor quality. The lower the risk equates to a better price to you, the Seller.
What is the mimumn size of tax invoice?
An invoice needs to be $5,000 (incl. GST) or greater with no limit to the size of the invoice.
Can Invoices be “combined” for funding purposes?
Yes Invoice can be combined for funding purposes but conditions will apply and be dependent on the quality of the debtor.
What kind of debtor is acceptable?
Each Funder or Financier will impose conditions of acceptable debtors. For example Not all debtors are acceptable as some funders do not allow businesses to trade invoices that are to consumers (B2C). The Funder will assess each invoice and debtor on a case by case basis. The decision to post an fund an invoice is solely at the discretion of the Funder or Financier.
Some broad parameters on our assessment criteria are provided below:
- Ownership: Invoices issued to any business with an ABN are acceptable. The stronger the credit worthiness of the debtor, the more competitive the discount fee will be.
- Size: Debtors can be of any size, but we would expect them to have annual revenues in excess of $250,000.
- Credit worthiness: The Funder will undertake credit assessments of your debtors. Businesses that are likely to go into administration or bankruptcy will generally not qualify as debtors.
- Profitability: Ideally debtors will be producing annual profits, but this is not an essential requirement. Every debtor will be individually assessed and feedback provided to you usually within 2 working days.
- Geographical location/ domicile: All businesses operating in Australia are eligible. Debtors in international jurisdictions may also be acceptable on a case by case basis. Businesses that are based in countries that have significant fraud or money-laundering histories are likely to be rejected.
Will you collect old accounts for me?
No, we Cashflow Recovery are not a debt collection agency. However we can introduce you to a specialist business partner who may assist you in this regard. Call us for an introduction.
Will all my Invoices be funded or financed?
Whilst we cannot guarantee that your invoice will be funded, we will work with you to best understand which of your invoices have the highest likelihood of attracting interest from our Funders. With our diversified group of registered Funders and their different funding appetites, we are confident that a solution can be found for you.
What other services does Cashflow Recovery offer?
At Cashflow Recovery we offer a range of services to help business improver Cashflow including
- Home Loans
- Investor Loans
- Aged Care Loans & Reverse Mortgages
- Property Depreciation Reports preparation services
- Ezycollect Accounts Receivable administration system
- Vehicle Select – Car buying Service