Cash Flow Financing – Alternative Funding Scenario Down Under

If you have been watching the global financial scenario closely, you will know how gold rush in San Francisco was followed by Land rush in another state in United States Oklahoma, and it is now time for Australia to experience the rush of Alternative Funding.

Why Australia is experiencing Alternative Funding Rush?

Experts are of the opinion that there is huge potential in the Australian markets as a result of which market players comprising alternative funding providers and business owners are sitting back and watching the progress of the markets. It goes without saying that every business requires a steady cash flow in order for it to grow steadily.

As of September 2015, more than 15 alternative funders had already started operating in the Australian markets. Here we will highlight cash flow financing and the various nuances associated with the same.

How does cash flow financing work and how important is it?

Cash flow financing is basically an alternative funding example. There are several instances, when you fail to receive payments from clients, which in turn impacts the financial activities of your company, which depend on that very payment.

Non-payment usually occurs due to oscillating price of products (as per market conditions), increase in expenses and overhead costs, and last but not the least, competition, which will compel you and your team to match up to the other market players.

When a business, regardless of whether it is small or medium sized is cash strapped, cash flow financing helps to overcome the financial crunch. All you have to do is prepare an invoice and if you have settled for cash flow financing provider, send a copy of it to the alternative funding company.

Usually, the financing company will provide the funds within 24 hours or a single business working day. Generally speaking, most of the funding companies pay 80% of the total amount of the invoice. You might also come across companies that offer discount rates from time to time. While most of the companies will pay the balance 20% later, few companies lay down a condition that when your clients make the payment, you will be paid that amount too.

Qualifying factors as Australia has no FICO Score

The markets in the United States differ from that in Australia as far as working out the eligibility criteria are concerned. While in the US, the FICO score helps in determining a debtor’s repayment capacity, since the concept of credit score is not prevalent DownUnder, credit worthiness of individuals is based on the transaction history of individuals seeking alternative funding avenues.

What to expect from a reliable funding company?

Given the fact that there are so many funding companies operating in the market, settling for a reliable one is a tricky job. But it is always advisable not to be hasty in your decision. Ideally, the funding should be fast, proper record maintenance should be opted for, no hidden clauses or conditions, and last but not the least should have had a good track record in the past since the time the company has been in this business.