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Business loans which have to be repaid over a period of 12+ months can turn out to be more expensive than they look.
Most lenders charge fees for setting up and providing a business loan, the best way to compare costs is by getting out your calculator and working out the annualised percentage rate (APR). Some ‘alternative lenders’ offer products that are called “unsecured loans”, which can carry APRs as high as 72%, even though many of them are actually secured by a personal guarantee!
Another form of business financing called invoice finance, provides a very clear cost structure. Invoice financing is the sale of a company’s assets (ie: the existing debtors or client invoices) at a small discount to the face value. As the discount fee is only payable once your debtor/client has paid the invoice, you don’t need to calculate ongoing costs. The fee that a company like OptiPa deducts for advancing cash against your invoice isn’t really like interest at all (although it is sometimes referred to as an interest rate), and should never be annualised as an APR, simply because invoices are not paid on exactly 30 days every month.
Of course, the real point of any cost-comparison exercise is to find out which option is the cheapest and best for your business. The fact is, it also depends on what you want to do with the money, because if you use invoice finance correctly, it can be free. In fact, a well-managed invoice financing solution could actually make you money and improve your cash flow. That’s right and all because of innovation, technology, changing product design and delivery of funds.
If you are an Australian business trading with other businesses, the chances are that you pay for your goods and services 30, 45, 60 or even 90 days after receipt of an invoice. Maybe you’d like to pay sooner, but because your customers pay late, that’s the best that you can do.
There’s nothing wrong in paying within standard timescales, but your suppliers would love to get paid quicker and many of them are prepared to offer substantial discounts to those that pay promptly, but for many businesses the ability to pay COD eludes them and thus the ability to negotiate real discounts. For any business with good turnover, there are considerable extra profits available by accessing these discounts.
The theory is that if you use Invoice Finance to access your accounts receivables upfront and use some of that money to pay your suppliers early, you can make money from your business lending as the cost of accessing the Invoice Finance is less than the discount you receive for paying suppliers COD. In practice, you don’t even need to go through all those steps because OptiPay does it for you.
With no upfront fees or charges, and no property security, OptiPay brings you your cash up front by paying your suppliers invoice immediately. The cash flow benefits to you and your supply chain are significant and you get to keep the net cash flow benefit in your business. All this without having to use any of your own capital or pledged security in the form of property to achieve the benefits.
So it turns out you don’t need that calculator after all: no matter how hard you look, you won’t find a business loan that charges a negative APR!
Fill out the form below to see how much capital you can raise with OptiPay It will only take a few seconds & will not affect your credit rating.
This is Paul, he is one of the directors of UVS, a labour-hire provider to the construction industry. Here’s what he has to say about how OptiPay was able to help his business grow and succeed. Contact an OptiPay expert today to see how we can help you.
OptiPay offers several different funding solutions and services, one or more of which charges no interest and has no long lock in contract period, called the Fully Flexible funding option. Conditions, fees and charges apply to some of the Services provided, which may change, or we may introduce new ones in the future. Full details for all funding options (Services) including any fees and charges which may apply, is available on request. Lending criteria apply to approval of credit products. This information does not take your personal objectives, circumstances or needs into account. Consider its appropriateness to these factors before acting on it. Read the funding agreements provided, for your selected funding solution (product/service), including all the Terms and Conditions contained in agreements provided, before proceeding. *T&Cs: Minimum 12-month invoice funding contract with OptiPay. Direct clients only, offer doesn’t apply to broker introduced clients. All standard credit terms and conditions apply including credit assessment. Not applicable to existing clients.