Line of Credit
Line of Credit funding was introduced for a faster smoother process. Lenders would be able to access the limit of turnover each month and approve a 30-50% ledger of funding. An example of this is if a client has $50 thousand each month then depending on payment terms, at the end of the 2nd month $100k would be outstanding. A lender will immediately approve 30-50k finance. As relationship builds with both parties lenders will increase lending.
Advantages of Line of Credit
Clear advantages are
- there is no messy paperwork verifications
- no Exposure issues
- funding is like an overdraft with monies coming in and out of the line of credit account.
- Fast funding means fast actions.
- In most cases no lock in contacts or small term contacts.
- Security is still in the debtors, with personal guarantees and PPSA on the business.
Disadvantages to Line of Credit
- Risk is with the lender, and pricing can be dictated by the lender as its fast funding, with no frills. (This is where the client must take in consideration situations, margins, and debt terms.) Traditional lending is much cheaper.
- Paperwork and financials have to be in acceptable condition.
How is it different from other lending?
Traditionally Invoice funding revolves around having more than one debtor with invoices outstanding. On verification that all work is completed either verbally or in writing, these invoices can be funded within 48 hours of approval. The percentage of funding would be normally 70-80% up front, depending on the risk, with the balance of the invoices paid (20% less fees) when the debtors pay the lender. This type of lending can be slow, due the level of admin the debtors have in getting invoices approved. Also it can be help up if clients have an exposure to a debtor and the level of risk is too high.
Find more products, for your industry and your business
- Transport & Storage
- Retail Trade
- Export Facilities
- Import Facilities
- New Business Owner
For more information or inquires to lenders we support in this industry, please contact 1300 00 8332
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