Invoice Finance

Learn how invoice finance works with Earlypay

What is invoice finance?

Invoice finance, sometimes called accounts receivable finance, is a business financing solution that lets small businesses borrow funds against unpaid invoices. The term invoice finance includes financing of a single invoice, invoices with some of your customers or your whole accounts receivable ledger. Invoice finance providers typically advance up to 80% of the value of your invoices with the other 20% either paid to you later or used to pay off your loan balance.

Repayment
When your customer pays the invoice
Charges
Pay only for what you need
Speed
Same day funding
Collateral
Invoices are the security

Pros

Don't need to wait for the invoice to be paid to receive funds
Invoices are collateral not real estate property
Based on credit of your invoiced businesses
Flexible access to funding

Cons

Costs may be higher than real estate backed finance

Who qualifies for invoice finance?

Businesses that have outstanding receivables with other businesses can qualify for invoice finance.

As the collateral for your loan is your invoices, the amount you can qualify for depends a lot on the total amount and quality of your invoices. It also depends on the general creditworthiness of your business including things like revenue and the time you have been in business.

What you need to qualify

A valid ACN or ABN
Invoices with other strong businesses
Invoices for goods or services that have been delivered
You use Xero, MYOB AccountRight or Quickbooks

How do you apply for invoice finance?

Applying for invoice finance with Earlypay is a quick and easy online process. Simply sign up to Earlypay and connect to Xero. This allows Earlypay to securely view your accounts receivable ledger and some other relevant information. Additionally, we may require the following:

Certified Photo ID

A driver's license or a passport

Bank Statements

Access to the last 6 months

ATO Statements

ATO Integrated Client Report

Credit Scores

Credit Score Report

How does invoice finance work?

In a perfect world, customers would have reasonable payment terms and always pay on time. Unfortunately, that’s not always the case which is why invoice finance has been used by businesses for thousands of years.

Having reliable access to cash flow is essential for any growing small business. Whether it’s for paying suppliers, your employees, investing in equipment or stock or simply having the confidence to take on that big new order, having cash available when you need can ease a lot of the stress of being a small business owner.

How invoice finance helps cash flow

Invoice finance lets you unlock cash from your unpaid invoices. Rather than waiting for your invoices to be paid, you can smooth business cash flow by bringing forward some of the funds you are owed. These funds can be then used for business operations or to invest in growing your business.

How does Earlypay work?

You can start to draw funding once you are on-boarded. Your available funds are linked to the amount of eligible receivables which are invoices that we agree are eligible for funding. As invoices are raised and paid, your eligible receivables amount and in turn your available funds is updated. You can simply request funding through the Earlypay platform and receive same day funding.

The Earlypay platform also has a simple and easy to use receivables management tools that help you get your invoices paid sooner.

Your customer invoices will be paid into a new collections account set up by Earlypay in your name and payments will be used to pay off your loan and you will receive the excess.

Earlypay’s integration with Xero lets us post transactions relating to drawdowns and repayments back to your Xero so you can reconcile easily with bank transactions.

Find out more about how Earlypay’s Invoice Financing can solve your cash flow problems and book a meeting with us today.

What will invoice finance cost you?

If you are prepared to offer your home as security for a business loan you will almost always get the lowest cost of funding for your business. The other extreme is unsecured business loans where no security is taken and lenders have to charge more for the additional risk.

In between real estate secured loans and unsecured business loans sits Asset Based Finance. This is where a borrower uses an asset on the balance sheet of the business as security for a loan. Common examples of asset backed finance are vehicle finance and equipment finance. Invoice finance is another example of asset based finance. By using your accounts receivable ledger as collateral, you can lower your cost of funding without having to mortgage your home.

When is invoice finance worth the cost?

Although invoice finance is more expensive than a loan secured by real estate, it is also a lot more flexible given its short term nature. Business owners can draw funds against invoices when you need a cash flow boost and the loan will be repaid when your invoices are paid. There is no need to be paying interest on an ongoing loan balance.

The funding flexibility that invoice finance provides not only provides the peace of mind knowing that cash can be unlocked from the ledger when required, it can also give business owners the confidence to invest in their business and take on new orders knowing that finance won’t be an issue.