Business Invoice Financing or Line of Credit or Overdraft Facility

Hi, I have recently started looking at various options to manage cash flows in my business and doing a lot of research into the different products available. I am starting to understand the differences between invoice financing and overdrafts and line of credits.

Does anyone have any recommendations on brokers they have used or product they are using.

Ideally, we want a facility that we pay for only when we drawdown on it. For eg: we don't want to establish an overdraft facility for say, $500k and pay $5k a year for something we may not use at all or we may drawdown $10K for 2 weeks in the year.

Invoice financing looks more promising, but none of the websites are transparent on the fees they charge; hence asking if someone is using a facility that they would recommend.

Cheers.

Comments

  • +1

    Invoice financing (factoring) is basically just like an overdraft facility in that as you pay interest on the amount drawn on the bank overdraft, you pay a factoring interest cost on the amount of the invoice. At a guess it would be 13%-15% pa, am happy to be corrected.

    • Yes, I am leaning towards invoice financing. The thing that gets me is the annual facility fee. Does anyone know of any product available where the annual facility fee is near zero - happy to pay establishment fee and a slightly higher usage fee.

      What I've seen so far is that the usage fee varies from 1% to 3% per month. The annual facility fee seems to be around 1-2% (which is what I feel is a waste if you don't need to use it much).

  • invoice financing is a common way to accelerate cash flow into your businesses using its receivables as oppose to property assets. If you want piece of mind and cash flow certainty, a line fee of 1-2% is payable and is cheap insurance - most of these lenders are non-banks thus they borrow funds themselves to on-lent to you. feels like you want more of an adhoc or "selective debtor" arrangement, these are more expensive than a portfolio wide facility

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