COVID continues to impact the local and international economy causing VUCA
VUCA stands for volatility, uncertainty, complexity and ambiguity. One consequence is that business owners are turning to invoice financing to finance growth and the purchase of new stocks.
According to Daniel Riley, business owners are fed up with having to put in the effort to get the financial help they need from banks to keep their businesses running.
Daniel Riley is the co-founder and CEO of Earlypay Limited, an ASX-listed company (EPY). Earlypay is an Australian customer-focused business finance organization. It provides invoice finance, equipment finance and trade finance to Australian small and medium enterprises.
âBill financing has been around for many years. However, thanks to COVID and the growing reluctance of banks to offer business owners an easy way to access regular and reliable funds without having to put the family home in jeopardy, demand and popularity have increased, ” Riley said.
âBill financing is one of our most active areas of business, and it’s helping business owners across the country weather the pandemic, especially those who have to wait months for their inventory to arrive. due to shipping and transportation delays.
âIn essence, invoice financing provides up-front financing to businesses for invoices issued to customers. “
Riley explained why invoice financing is ideal for businesses.
Easy to set up
âThe financing of invoices is very easy to set up. Once the installation is established, the company simply generates and sends invoices as usual. Copies of the invoices are then submitted to us and we prepay 80% of the value of the invoices to the company, âsaid Riley.
âIn fact, if the company is using Xero or MYOB Live, we can integrate the systems and automatically access invoices directly.
âThe funds are then automatically deposited into the company’s account. The business no longer has to wait for invoices to be paid or to chase debtors away. It becomes our job.
No real estate guarantee required
âOne of the main advantages of invoice financing is that it does not require real estate security. Funding is advanced on unpaid invoices, and the main security is in the invoices themselves, âsaid Riley.
“In effect, the company is simply paid the funds owed to it, but up front.”
Ideal for a less than perfect credit or trading history
âUnlike the unsecured business loan application process where banks require business owners to tell their life story and demonstrate many years of flawless negotiation, the process of setting up invoice financing is much less expensive, âexplained Riley.
âInvoice financing is ideal for businesses at any stage of the lifecycle, including growth and large established businesses. In fact, invoice financing is also suitable for businesses with a short business history, large debt, or less than perfect credit history, a group often overlooked by banks.
âInvoice financing provides the flexibility to adapt to almost any type of business, provided an invoicing system is in place. “
âThe process of financing invoices is very discreet. Business customers simply pay the invoices into a collection account established in the name of the business that repays the unpaid financing, and the excess becomes available to the business, âRiley said.
âAll follow-ups with clients are done on behalf of the company as the accounting team. This ensures that the invoice financing agreement remains confidential.
Riley says demand for bill funding has increased by more than 200% during the pandemic.
âSome of our customers pay large sums to place stock orders that take up to six months to arrive in Australia. This is a long wait for a business to get a return on its expenses. It takes deep pockets or the backing of a large established business to be able to cover these kinds of expenses – something that most small and medium businesses don’t have, âRiley added.
âBill financing allows businesses to keep money flowing fast and operations moving forward.
âCOVID has created an extraordinary and unusual set of business circumstances for businesses that traditional business loans are not designed to cover. Invoice financing, on the other hand, is more cost effective because it uses the company’s accounts receivable ledger as collateral, making it less risky for the invoice financier.