Short-term Financing for SMEs | Collateral Free

FAQ for Invoice Financing

General Enquiries

What is Invoice Financing?

Invoice financing is a cash flow solution that enables businesses to get advances on money owed by customers upon completion of goods or rendered services, without waiting for the long payment terms that can be from 30 days to 180 days.

How does CapBay’s Invoice Financing work?

Invoice Financing operates when a business decides to sell their invoices (upon completion of goods or rendered services) to a third party, a Financing or Factoring company at a discount, such as CapBay. CapBay then takes over the task of collecting the receivables as and when they fall due.

When you provide goods or services to a customer on credit, usually you have to adhere to an agreed payment term ranging from 30 days up to 120 days to receive your payment.

With Invoice financing, you can get instant upfront payment of 80% of the invoice amount without having to wait for the payment terms from your customer. You can have full control of your receivables without any worry!

Refer to the illustration below to understand how Invoice Financing works with CapBay:

What are the benefits of taking up CapBay’s Invoice Financing solution?

CapBay’s Invoice Financing solution is an optimal approach for your businesses to improve cash flow as CapBay disburses payment within 48 hours to the borrower. It is also a great way for your business to fund the operating expenses without taking additional financing which can lead to bad debts. Businesses can consider the following before they opt for the type of Invoice Financing that suits their business needs:

Financing whole ledger or only a few invoices
Putting the whole ledger with CapBay but only financing part of the invoices, or do the whole ledger and access more cash flow.
Credit control
Some factoring houses will insist on managing credit control themselves which could affect and damage the customer relationships.

Read our article to know how CapBay Invoice Financing solution can help unlock a new lifeline of cash for your business

Am I eligible to apply for CapBay’s Invoice Financing solution?

You can apply for Invoice Financing with CapBay if:

Your business is providing services or goods to other Malaysian businesses on credit terms (Business-to-Business nature).
You have mid-to-large size corporation(s) as customer(s) (private or public)
Your business has an annual revenue of more than $500,000 SGD.
Your business is a Singaporean registered business (including sole proprietor, enterprise, and Sdn Bhd.).
Your business is majorly owned by Singaporeans(more than 51%) and has been in operation for at least 1 year.

*You may also get a quote from us even if you do not meet either one of the required criteria stated here. We can’t promise that we will be able to approve your application but we will consider your application, subject to a case-by-case basis.

What is the minimum or maximum funding amount provided by CapBay?

CapBay will finance up to 80% of your invoice value. We are able to offer an invoice financing limit from $14,000 SGD (minimum) and up to $400,000 SGD (maximum). The tenure of the facility can range from 30 days up to 180 days.

How long is the application process for invoice financing?

Generally, application processes may (from application to approval) take as quick as 5 business days and up to 2 weeks upon complete submission of documents required. To speed up your application process, start preparing your documents as early as possible.

How long do I have to wait to receive the advance cash?

For onboarded clients of CapBay, you will receive the advance cash as quick as 48 hours upon submission of invoices in our platform.

For new clients, there will be an extra onboarding process which takes about five (5) working days.

What are the fees and charges that I need to bear for CapBay’s Invoice Financing Facility?

Sign up fee: Free of charge
Platform Fee: 0.75% – 2.25% on financing amount
Discount Fee: 0.8% – 1.5% per month on financing amount (10%-18% per annum)
There are no other hidden charges or fees aside from the ones stated. Stamp Duty & Legal Fees are born by CapBay.

Industry Related

Why do construction companies need financing?

The key reason why Construction companies seek financing is due to its specialized nature of diverse tasks involved in the building process, and the involvement of the main contractor to work together with a number of subcontractors, which leads to delays in payments.

Main contractors are large companies that usually have wider access to financing. Besides that, they are also in a position where they don’t need to hold much working capital themselves as they don’t pay subcontractors until they are paid by their client.

Normally, subcontractors are smaller companies and they need huge working capital to pay for purchasing building materials and labors prior to being paid by the main contractor. The issue which construction companies face is the limitation of finance options because of the challenges that lenders face in underwriting SMEs.

Why do manpower agencies need financing?

It’s common to see manpower agencies seeking to get financing due to the lengthy payment terms to be paid for their services when contractors are paid monthly but clients pay on specific payment terms. Hence, agencies often face obstacles in cash flow management and require financing to reduce their cash flow gap.

Why do engineering companies need finance?

The Engineering industry often faces the common problem of delayed payments from the main contractor. Besides that, engineering companies may need the initial funds to purchase materials such as CCTV, wiring, light bulb, and other relevant materials to operate their business.

Why do manufacturing companies need financing?

Manufacturing companies extend their payment terms in order to build a strong relationship with customers. As a result, they face longer payment terms after completion of work and during that time, they would be facing critical shortage of cash flow. They experience cash flow challenges due to the large volume of orders, leasing commitments, and others. A high volume of regular invoices results in restrictions in business growth especially in a highly competitive sector as the payment terms are on credit. Hence, invoice financing can solve the liquidity problem of their cash flow.

Types of Financing

What is Invoice Factoring?

Invoice factoring is a way for businesses to fund cash flow by selling their invoices to a third party at a discount. The provider will take the role of managing the sales ledger, credit control, and be responsible for chasing payment from your customers. Factoring facility arrangements tend to be restrictive and you will be entering into an assignment of payment account at your customer side. It may also lead to the aggressive chasing of outstanding invoices from your customers.

What is the difference between Invoice Financing and Bank Overdraft?

Banks Overdrafts (OD) usually bears a lower interest rate than Invoice Finance but this does not necessarily mean you pay less interest.For example, for an OD facility of $1,000,000 SGD, a bank can ask you for $500,000 SGD as a fixed deposit which means you are only borrowing $500,000 SGD from the bank.

However, the Bank will charge you for the whole $1,000,000 SGD drawn-down facility. Therefore, you are paying twice the interest for the $500,000 SGD borrowed. With CapBay’s Invoice Financing, you are only charged for the $500,000 SGD you have borrowed.

What is the difference between Invoicing Financing and Term Loan?

In Term Loan, say Company A takes a clean loan at 8%. It needs to pay 8% for the whole year even if they do not use the facility for some months during the year.

As for Invoice Finance, say Company A takes invoice financing at 12% per annum. This amounts to 1% interest per month. However, if Company A only needs to use Invoice financing twice in that year, it only needs to pay 1% for each month depending on the invoice tenure. Company A is not required to pay interest for the months when the facility was not used. Invoice financing only charges when it is being used.