Factoring – Debtor Finance the ultimate finance for new business.
Factoring – Debtor Finance the ultimate finance for new business. Ensuring that brand new businesses survive after 12 months is the ultimate challenge. Often the struggle begins when cash assets begin to dry up as your idea grows. For the first two years business owners need to establish financials in order to ascertain banking products. The only exception is if there are bricks and mortar assets supplied by the owners. Using these assets involves using your personal assets to keep your business operating.
Why use your families assets to ascertain cash flow?
Once you involve your families assets, the stress you need to ensure the business is successful can be over whelming. Most finance products need security of sort. In most cases the less you pay, the more security is required to ascertain the product.
This is why you choose Factoring or Debtor Finance earlier.
Often in new business start ups, there is less than 10 employees operating the business. Focus is often on purchasing and sales. Faster the turn around, the more profits are made. Business owners mark success by profit in most cases. Size and quantity of sales is often the markers for owners to gauge success. Some owners jump on this opportunity and hire more staff to complete the rise in demand. Often in the need for more sales and or clients, terms of clients starts to push out. 14 days, moves to 30. 30 days becomes 60 or more. Business owners cash flow starts to dry up. Debtors ledgers grow, and sales have to slow down as stocks diminish. Newly appointed staff start to be less effective as work comes to a stand still. Then when client pay the new sales are raced out, for the cycle to begin again.
How can you fix this?
Credit limits, strict terms adhered too, and collection procedures are a firm start. However in today market, most new owners don’t fully understand the fundamentals of working smarter. For example if your product is purchased and sold to a client. Your margins are dictated when the client pays for their goods. Often its worked by a 30 day payment.
If the client extends terms then owners cost go up rapidly. This is a brief explanation how. Staff have to make extra calls. Send letters and document their progress. Owners have to either put future sales on hold, or space them out to ensure products are still moving. Finally borrow monies to improve their cash flow while waiting for the debtor to pay. Either way if a client takes 60 days or longer to pay for goods, then your offering the product as cost or at a loss. This is not always the case in every business, but a common fault in most.
Factoring – Debtor Finance – Invoice Discounting.
You will notice I didn’t just jump in and state look at these products as they will be you shinning light. Its because often these products are expected to save the failings of a new business. In my experience opinion this is not always going to happen.
Factoring of your clients, is basically putting all your outstanding and future invoices into a finance company for funding. These factoring companies will verify the work is completed and offer a percentage of those invoices to your firm for your cash flow. When you debtors pay. Your debt is cleared off with balances given back to your firm less fees. its an overdraft on your invoices, secured by your clients. Seems simple, well its not. It can be complicated and expensive if not used correctly. Its why our family owned business has been so successful placing clients.
Why to use Trade Debtor Finance Consultants?
These products have been used in a wide way of uses. Some lenders will let you offer up most of your ledger. For example imagine if you only fund you slower paying debtors. Or you can just fund a larger lender only. These products were designed to help your business, not send you broke. Fees and charges often are determined by the length of time the debtors take to pay and the amount of invoice you have.
Trade Debtor Finance Consultants are a family owned business in Queensland offering an obligation free, written quote to your firm at no direct cost. Our firm has Debtor Finance lenders Australia wide and liaises with their staff to ensure your business ascertains the best advice’s. Consultants will assist in helping arrange, setup, and ensure if required assistance for the life of the loan. Again this is our promise to new business.
We look forward to your questions.