Having capital tied up in unpaid invoices can be a huge financial burden for SMEs, especially in today’s economic climate. When it comes to invoices, some companies will understandably take advantage of the full repayment terms offered. Whilst this is beneficial for them, suppliers sometimes must wait months for customers to settle what they owe. This can often leave small business owners with cashflow strains.
Maintaining a healthy cashflow is crucial for business growth and success, so it goes without saying that waiting 120 days for an invoice to be paid can be a major headache. That’s where invoice finance comes in. Increasing in popularity for this very reason, invoice finance is a quick and efficient way to gain access to the capital that you’re owed from outstanding invoices. It leaves you free to pay suppliers and employees, or invest in new equipment, operations or overall business growth.
What is invoice finance?
Invoice Finance is a kind of business financing where a business can use its unpaid invoices as a mechanism to raise cash and fund growth. Invoice finance companies will advance a business up to 90% of the value of its unpaid invoices. The funds released can be used to meet new orders, invest in new machinery or raise a deposit for a commercial mortgage. There are a variety of invoicing facilities including invoice factoring, invoice discounting and selective invoicing.
What are the benefits of invoice finance?
Perhaps the most immediate advantage, invoice finance can boost your cashflow and free up funds. This allows business owners to capitalise on new growth opportunities, equipment and projects for your business.
Improved cashflow also gives you a competitive advantage. When market leading technology and innovations are introduced, you’ll have the capital available to invest them. This ultimately puts your business ahead of the competition.
Unlike traditional bank overdrafts, an invoice finance facility will grow in line with your turn-over. The flexibility provided via invoice finance and quick decisions to lend against invoices ensure that access to funding never gets in the way of your growth ambitions.
Quick Access and Fewer Limitations:
Having an invoice finance facility allows a company to be promptly paid for services and products that have already been supplied, quickly freeing up cashflow.
Once set up, a business can draw down on unpaid invoices in as little as 12 hours. This means you can focus on the growth of your business without being at the mercy of customer payment schedules. Whilst many other forms of business funding have limitations, invoice finance does not. As long as your business qualifies, invoice finance is readily available for you to use.
Less Risk to Assets:
Whilst there aren’t any funding solutions that are completely ‘risk-free’, invoice finance provides business owners with a financial alternative that has less risk to personal and business assets. Unlike other types of funding where lending often required collateral in the form of assets, invoice finance requires something else.
In fact, the invoice itself usually acts as the security. This is ideal for business owners prefering to protect their assets or use them as collateral for other funding agreements.
Better Purchasing Power:
Having access to funds as soon as you invoice can help you pay off your creditor accounts in good time. Invoice finance allows you to establish prompt payment of your own purchase invoices, leading to better purchasing power and credit history, increased credit limits and more favourable payment terms.
Better purchasing power will often result in partnerships with more suppliers, reduced pricing and establishing stronger supply chains. This also allows business owners to increase profit margins and turnover. Ultimately, this provides them with more working capital to invest back into the business.
How do I apply for finance?
Applying for invoice finance is a seamless, stress-free process. Depending on the needs of your business, the first step is identifying which type of invoice finance facility is right for you. Whether it’s invoice factoring, invoice discounting or confidential invoice discounting, PMD have a team of experts with extensive experience in securing funding for businesses across varying sectors. We’ll help you understand jargon and various pitfalls and ultimately ensuring you get the right facility for your business.
Our specialist finance team will take the time to truly understand your business and find the right funder to support your growth plans. With a complimentary benchmarking service and access to over 50 invoice finance lenders, we’ll ensure that you get the most competitive rates available.
Get in touch!
As an industry leading commercial finance brokerage, we believe that no business should be held back by its finances. Our dedicated team are knowledgeable in a range of business finance solutions and have access to a panel of over 150 funders across all asset classes,. This allows us to secure the right funding package for the needs of your business.
If you’d like to find out more about how we can help, get in touch on 0161 633 2548. Alternatively, you can keep up to date with all the latest industry news updates on our LinkedIn page.