Invoice factoring in New Zealand works by selling your outstanding invoices to a third party invoice financing company. Invoice Factors then pays off the outstanding bills. What you’ve done is simply turned all your delinquent accounts, or those which were placed into the dormant bank account, into an instant advance. This is one way that businesses can get funds to operate, even during times of economic trouble. The money can then be used for either new growth or paying off existing debts.
When you need funding due to poor credit or financial hardship, invoice factoring in New Zealand offers fast and effective solution. It offers finance to businesses in need, which can help them to cope with temporary cash flow problems. There are three finance options available through invoice financing – receivable finance, line of credit finance and business line of credit finance. Each has their own set of benefits and drawbacks for businesses depending on their circumstances.
Receivable finance is offered by your invoicing factoring company through credit checks to a bank. If you need a large amount of funding, this could be an option to consider. The payment dates are generally from one to five months depending on the amount owed and the bank’s policy. If a bank offers this option, it may be with a high interest rate because most small businesses are not well aligned to take on such high costs.
Line of credit finance is offered to businesses that need short term funding to cover short-term expenses until their next invoice date. Because you’re only charged a flat fee against the funds you use this is a very convenient service for many different types of businesses. You generally won’t get a lot of flexibility with this type of funding, though. If a company runs out of money before the end of the month, they must get that money from the bank or pay fees to have it repaid. Businesses that make a lot of sales with a large outgoing invoice may be better suited to opting for a bank overdraft, which is also available in New Zealand.
The invoice factoring New Zealand solution works very much like a normal accounts receivable ledger. Your invoice is created, printed and then processed just like an invoice from a customer would be. Your customers are charged for their purchases, you pay the invoicing amount and keep their invoices updated. When a business has paid its bills and received a payment from the customer, its accounts receivable ledger will show the sale and the funds available to pay the bill.
The application process is fairly simple. You’ll need to provide your business name, capital, and your deposit (if you’re applying for funds from a bank). After processing the application, your credit terms will be processed. Depending on the type of invoice factoring NZ you’re applying for, your credit terms can include credit facilities such as commercial lines of credit, merchant credit facilities, and instant line of credit, among others.
Some factoring companies also offer debt consolidation loans. Debt consolidation loans are ideal for businesses that are heavily in debt. With these loans, businesses can obtain low-interest loans to pay off existing debts and meet new obligations. Businesses that use Hamilton invoice solutions can save a great deal of money by using these loans instead of paying interest on high-interest credit terms.
In most cases, a bank loan or equity loan is not the best way to pay invoicing. A personal loan might be a good option, but these loans are not easy to qualify for from a bank. The best option may be an invoice factoring NZ arrangement. These arrangements are generally made between your business and a factoring company. Factoring companies generally do not require a high credit rating, making them a good option for small businesses.