In the news all we are hearing about is the state of the credit crisis which has had a flow on affect into Australia and has been affecting small business finance in 2008 more than ever. As we lean into the Christmas period business owners will be seeking ways to increase the amount of working capital or cash flow immediately for buying new stock, payroll and bills.
The most obvious option for the small business owner is to approach the bank for an overdraft. But as is the case for many growing and small businesses, they are considered too high risk to get an overdraft facility and with the banks usually requiring property security this can increase pressure on all aspects of the business owners’ life, not only in business but personal as well.
The most over looked area to release working capital for Christmas is in the outstanding invoices of the business. Factoring is the name used by finance providers; it works by looking at the amount of outstanding invoices each month in the business. The factoring company will then assess the credit worthiness of the businesses customers and grant a credit line based on the invoices being generated. The process is very easy, the owner will simply raise an invoice as normal and forward onto the factoring company who will give up to 80% of the invoice value within 24 hours and the rest when the customers pays the invoice in 30-90 days. Funds are direct deposited into the businesses account to enable payrolls and other outgoings to be met without having to rely on the customers’ promise that the cheque is in the post.
Leading up to Christmas this form of small business finance is ideal with its easy application process and fast setup times funding can take place within five working days.