One of the biggest challenges that businesses face is maintaining a healthy cash flow so they can keep operating. Often, money can be tied up in amounts due from customers between the point at which you make a sale and the time that payment is received. That’s where invoice finance comes in.
In other words, invoice finance is a way for your business to borrow money against unpaid invoices and boost your cash flow. You don’t have to wait for your customers to pay their balances in full. Instead, you can pay your employees and suppliers, as well as reinvest in operations and grow faster.
There are other compelling benefits of invoice finance too. Let’s explore the top 5 now.
1. The Facility Grows in Line With Your Sales
Firstly, businesses can choose how much cash that they want to access on invoice finance and when. Many forms of finance have an upper limit, proving restrictive when you need access to higher amounts of cash. Fortunately, invoice finance doesn’t have any limitations. It aims to increase alongside your sales. In other words, the more your sales grow, the more your facility will grow too.
2. Personal Security Isn’t a Requirement
Traditionally, banks have offered overdrafts as the preferred method of funding a business. However, in recent years, they have become warier of this. Nowadays, they tend to require “bricks and mortar” security for their facilities, such as a home. Invoice finance works differently in the sense that it’s not always necessary to provide security as assets to set up an agreement. In fact, the invoice itself is usually the only security that invoice finance requires. This makes invoice finance a handy option for businesses that have few assets or want to protect personal assets from the facility.
3. It’s Easy to Set Up
Did you know that invoice finance facilities are typically set up within 5-10 working days? There’s minimal paperwork to file and the funds can be released from an invoice within 24 hours of receiving the required information. As well as being easy to set up, one of the other benefits of invoice finance is that it’s easy to qualify for. If your company doesn’t have any major financial issues and works with reliable customers that don’t have unfavorable credit records, you shouldn’t run into any issues.
4. There Is No Annual Review
If you go down the overdraft route, banks will review your company’s previous 12 months of trading. They’ll then set the facility in line with what they feel comfortable lending to protect the interests of the bank. Invoice finance has the opposite approach. It’s allocated to fund the upcoming 12 months’ projected turnover to assist with a company’s growth plans. Once it’s set up, it just rolls over each month so you don’t need to worry about the facility not being there when you truly need it.
5. It Can Be Confidential or Come With a Credit Control Service
Lastly, there are so many types of invoice finance available in the market today. Some facilities are completely confidential and all the funder will do is lend your business the money for a fee. Other facilities may incorporate some additional help in the form of credit control and sales ledger management, often known as invoice factoring. With invoice factoring, customers will need to pay the lender directly and the finance provider will have the responsibility of chasing late payments. This is more cost-effective, freeing up more time and resources that your company can put towards other projects. It can also provide the directors with a tangible benefit to any fees charged for the facility.
From a quick setup to growth support, there are several benefits of invoice finance for businesses in various industries. That said, it’s important to find an experienced finance provider with connections that will take the time to get to know your business and source the best solution for you. PMD has been trading since 2010 and has access to over 50 invoice financing companies in the market. If you already have an existing invoice finance facility, they can benchmark it against what’s currently available and improve on this by either reducing costs or increasing funding.