FAQs

There are 3 broad categories of finance:

• Debt
• Equity or Capital
• Hybrids of Debt & Equity

It is important to use the right mix of financing. The right mix depends on a wide range of factors such as the maturity of your business, the type of business, the industry that your business operates in, your appetite for risk, and so on. Read more.

Finance products (also called finance facilities) are in essence money packaged in different ways. Each type of package comes with a specific set of terms and conditions such:

• Purpose: What the money can be used for
• Loan Term: How long you can have the money for
• Repayment: When do you need to repay the money
• Security: Do you have to provide any assets or guarantees during the term of the loan?
• Other: Are there other things that you must do during the term of the loan?

The fundamental principle is to ensure that the debt finance package matches what your business needs and can afford. This is known as “match funding”. Read more.

This is where the debt finance package is ‘tailored’ according to your business’ cash flow; specifically the forecast cash flow under your business plan.

The term of the loan and repayment schedules are ‘matched’ to your forecast cash flows. Read more.

This is type of financing facility where a lender provides your business with money based on the value of your trade debtors. Advance rates vary between 70% to 90% but are typically up to 80% of the value of the acceptable invoices.

Once the facility is established, most lenders will advance the funds within 24 hours of the invoices being presented to the lender. The balance of the value of the financed invoices are returned to you when the invoices are paid by your customers.

5 key benefits of debtor finance are:

• Assists cash flow of the business by freeing up cash tied up in trade debtors.
• Highly flexible solution and ideal for rapidly growing or highly seasonal businesses. The debtors ledger is the key security and size of the facility can increase in line with growth in sales and debtors.
• Real estate security is not usually required.
• Cash that is freed up can be used to take advantage of discounts from suppliers.
• Can be a more cost effective way of accessing cash flow than accepting early settlement discount terms, particularly when dealing with major corporate customers.

Invoice Discounting and Factoring are the two main forms of Debtor Finance. The key differences between Invoice Discounting and Factoring are:

Administration Of Debtors Ledger And Collection Of Accounts.

With Factoring, the Factor (lender) takes on this function.

With Invoice Discounting, your business remains responsible for this function.

Disclosure To Customers.

Factoring is a Disclosed solution. Your customers are notified that payments are to be made to the Factor (the financier).

Invoice Discounting is a Confidential product. Your customers do not know that you are using Debtor Finance.

• Only commercial debtors can be financed.
• It must be a legally enforceable debt. If payment of the invoice is subject to performance or certain other conditions, it will not qualify for debtor financing. Example: Progress claims, common in the construction industry, do not qualify.
• Concentrations: Financiers differ in their policies on this.
• Quality of Debtors Ledger which takes into account Ageing, MIS/Credit Controls, Disputes/Returns history.

Read more.

Equipment finance is a catch-all term for finance packages for cars, plant & equipment, machinery etc. Both new and used equipment can be financed.

In Australia, there are a number of different forms of equipment finance such as Hire Purchase, Leasing, Chattel Mortgage. The ownership, tax and accounting implications are different. You should always get advice from your accountant as to what is right for your business.
Read more.

Equipment Finance is a highly effective way of financing your business. Benefits include:

• conservation of working capital
• ability to keep at the forefront of technological advances and improve efficiencies
• tax benefits (provided that the equipment is used for business purposes)
• flexibility in structuring payments to suit your cash flow
• budgetary certainties as most equipment finance agreements are written at fixed rates for fixed periods.

Both new and used equipment can be financed. Read more.

A rental agreement where the financier purchases the equipment and you rent the equipment for the term of the lease for a fixed monthly payment. Read more.

A fixed interest rate loan secured by a mortgage over the equipment being financed. Read more.

An agreement under which the financier purchases the equipment and rents it to you for a fixed monthly payments over an agreed period. When you make the final payment, ownership automatically transfers to you. More details here.

If you are an Australian business with strong growth prospects, I can assist you with raising money from investors via the Australian Small Scale Offerings Board (ASSOB) platform.

Find out more about the benefits of using ASSOB for fast growing businesses.

I help small and medium businesses obtain the right kind of financing to fund their growth plans and achieve their goals. I also assist business owners with strategic business planning in growth and business turnaround situations.

My services are provided as a fee-based consultancy (not as a commission-based broker). What is in YOUR best interests is core to what I do for you.

Please visit my Consulting page to find out more about typical projects, how I work with clients, and my fee structure.