What is Invoice Finance? And how can it benefit your portfolio?

August 01, 2018

Investing In IF

Investing in invoice finance

You may never have considered investing in invoice finance. You may not even have heard of it. The fact is, until recently, you wouldn’t have been able to invest in it at all unless you were a bank or financial institution. This new asset class has only been made available thanks to innovations in Australia’s rapidly developing fintech sector, giving investors more choice than ever. Timelio is at the forefront of this innovation and has developed a marketplace to connect investors directly with businesses looking to sell their invoices.

How does investing in invoices work?

Timelio offers two investment products; either as a direct investor, actively investing in invoices they choose, or investing in the Timelio Capital Fund, which will automatically deploy investor capital across every invoice on the marketplace.

As an investor there are a few key terms that you need to be familiar with when investing in invoice finance:

  • Invoice finance refers to the process of selling an invoice to an investor at a discount in order to receive the cash now instead of 30-120 days when the invoice matures.
  • Seller refers to the company or business owner that is looking for finance by selling their invoice.
  • End-debtor refers to the company being invoiced by the seller, and who would typically pay the seller upon receiving goods or services.
  • Investor refers to a private investor or investors, who in Timelio’s case are part of our investor network, and who will fund the invoice being sold on our marketplace.

While it can seem quite complex, invoice finance on the Timelio marketplace is quite a simple process, and it occurs in the following way:

  1. The investor completes a simple online application on Timelio’s platform, choosing either direct investment or the Timelio Capital Fund.
  2. When a seller uploads an invoice, investors will place bids to buy it using an auction model. Once the auction closes the following business day, Timelio will transfer the money to the seller.
  3. Once the invoice becomes due, the end-debtor pays the invoice as per usual into a Timelio nominated account. Timelio then distributes the money to the investor or investors who funded the invoice, offering daily redemptions on settlement for direct investors, or quarterly redemptions for investors in the Timelio Capital Fund.

Why is this a good investment option?

Investing in invoice finance has a number of benefits over other kinds of alternative investments:

  1. Investing in invoices on Timelio is a comparatively secure investment. Not only are the end-debtors typically large corporate or government customers, but Timelio also registers invoices on the PPSR, making investors secured party creditors. In addition, Timelio has a rigorous due diligence process for new sellers and all transactions are verified prior to being approved for auction.
  2. Invoice finance is uncorrelated with equity markets, offering security in uncertain times and providing the bottom-line benefit of a diversified holding.
  3. They are relatively short-term investments, ranging from 15 to 120 days (averaging 50 days), giving investors a highly liquid asset.
  4. It’s incredibly diverse. Not only can you spread your investment over numerous invoices (buying in as little as 5% increments), but over a number of different industries, ranging from FMCG, transport, and manufacturing, through to energy, commercial construction and business services, just to name a few.

Which investment is right for you?

As already mentioned, Timelio offers two different investment products for invoice finance, either as a direct investor or as part of the Timelio Capital Fund. A comparison can be found below:

  Direct Investors Timelio Capital Fund
Minimum Investment $10,000 $50,000
Invoice Selection Select what, when and how much to fund (5% increments) Automatic allocation of all funded invoices
Time Involvement Low-Medium Low
Liquidity Daily Quarterly redemptions and distributions
Subscriptions Daily Monthly
Management Fees Nil 0.50% per annum
Performance Fees 15% of settled profit 15% of settled profit
Targeted Net Returns Historically 7-12% annualised 7-9% per annum

 

If you want to add invoice finance to your portfolio, or for more information about the investment opportunities Timelio offers, get in touch with our Growth Manager David Webster (dwebster@timelio.com.au or 0490 228 953).

 

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