However, with the flood of new alternative business lending options like invoice finance Australia on the scene, along with the standard traditional business lenders that remain unfaltering in their lending, business financing has both thrived and become challenging to navigate. That said, here are the most popular ways to finance your business and some vital caveats that you need to keep in mind.
Invoice discounting, as with all types of invoice financing, is a simple form of financing your firm by selling your unpaid invoices to a lender that they, in return, give you a cash advance that is a percentage of the value of the invoices. One of your clients pays the invoice; the lenders offer the remaining balance minus their fee. In a nutshell, invoice discounting is a series of short-term business loans using your invoices as collateral.
Receivables financing, on the other hand, is one of the most straightforward forms of investment. It takes place when a company receives funding based on purchases that have been made but haven\'t yet been paid for by the consumers (accounts receivable finance). In simpler terms, it is where small businesses raise cash through unlocking the capital tied up in invoices that your consumers are yet to pay. It is a form of invoice finance, invoice discounting, or factoring.
Debtor finance is another form of small business financing that has primarily grown in popularity in Australia. It is a generic term that refers to products that fund a company via financing its invoices, and some of the most common forms of debtor financing are invoice factoring and invoice discounting. These two forms solve the same financial issue and offer you similar benefits, but they work differently and provide you with different features.