Bill factoring New Zealand is a financial practice in which an invoice for factoring services is made to another company in advance of the invoice factoring loan being repaid. The invoice is used to collect funds from the client, and is generally made out to an account receivable financing company. Bill financing can be referred to as invoice factoring, invoice finance, invoice cash advance or invoice finance. Invoice factoring is a practice that is not limited to the finance industry alone. It can also take place between third party invoice factoring companies and financial institutions as well.
Invoice factoring companies are generally registered with the Department of Business (DOB) in New Zealand. Invoice factoring companies are independent and they usually work together with invoice finance companies. Some bill factoring New Zealand companies have been known to form temporary joint ventures to provide invoice finance at higher interest rates to their clients.
This form of finance is referred to as “bridge finance”. Bridge loans are normally arranged as short term loans, and the interest rates are typically high when compared with normal interest rates offered by the finance sector. The bridge loans are intended to be repaid within a short period of time after invoice factoring companies receive the invoices.
The invoice factoring agreement will specify the process by which the invoice will be paid. The contract will specify the responsibilities of both the parties, such as whom it is intended the pay the invoice factoring loan to and when it is expected that the invoice will be paid. The invoice will be for an amount that is equal to or more than the funds advanced. In some cases, it will be necessary for the client to sign a contract to provide evidence that they have the funds available to repay the invoice factoring loan.
Invoice factoring companies will advance funds to a client on an installment basis, usually monthly, and the client will make all of their monthly payments towards the loan. If the invoice does not get paid in full, then the finance company will charge interest on the balance, which will add to the cost of the invoice. It is usually more affordable to pay the invoice in full rather than attempting to collect a part of the outstanding balance on a monthly basis. However, if a client pays the invoice late, they may have to pay a penalty fee to the factoring company. In some situations, the client may also be charged late payment fees.
Invoice factoring companies generally take a small percentage of the monthly invoice balances, called a “finder’s fee”. Most bill factoring New Zealand companies do not require any type of collateral for this fee. The factoring company will then use the money advanced as the credit line to obtain a loan against the outstanding invoice balance. If a loan is not repaid, the factoring company will become the creditor and will proceed with the collection of the outstanding invoice balance. Invoice Factoring NZ can sell either debt accounts or unsecured credit accounts to third parties.
There are several bill factoring New Zealand companies available, but many of them are scams. Before deciding to use invoice factoring as your debt-management technique, it is important to check out the company to make sure that the company is reputable and will help you eliminate your invoices quickly and easily. If you choose to use invoice factoring, it is in your best interests to research the company and its options so that you will be able to eliminate your debts more easily and in a timely manner.