Following the 2008 ‘credit crunch’ business cash flow problems have affected more and more businesses who have felt the pain of struggling to make ends meet. As the economy starts to improve, the risk is that companies that have survived the hard times and suffered a reduction in their available working capital will struggle to grow without additional business finance. If you operate in the business-to-business sector and are suffering a cash flow problem, perhaps you should consider invoice finance as a form of long term quick finance?
So what is invoice finance?
Invoice discounting your sales invoices is an alternative form of finance that advances up to 85% of outstanding sales invoice value to your business. With the banks remaining conservative with overdraft or term loan lending it might be time for you to consider alternative options to finance your cash flow requirement to support your growth aspirations.
Here are a few of the benefits to consider with invoice discounting:
- Quick access to funds. Financing your invoices gives you access to much needed working capital quickly (within 24 hours of a sales invoice) allowing you to meet day to day expenses, such as buying stock, paying wages, and investing in new orders without having to wait for your customer to pay your sales invoice .
- Eradicates invoice uncertainty to aid planning. Rather than waiting at least 30 to 90 days for payment you can receive up to 85% of the invoice value within 24 hours.
- Low interest rates. The downside to business loans is that you are committed to paying interest on the fixed sum you originally borrowed, but you may not need all of the loan, all of the time. However, with invoice finance it is more like a fluctuating overdraft as the amount you borrow can vary according to your needs, as you don’t have to draw down money against your sales invoices, if you don’t need it.
- No monthly repayments. Invoice finance does not work on a monthly repayment basis. The lender gets repaid the amount it has advanced against an invoice when your customer pays the invoice.
- The line of credit increases with your turnover. Rather than your credit being limited by a fixed sum, the line of credit can increase as your sales increase, so funding is directly related to the strength of the business.
- Useful insight and advice. Invoice finance providers will have gained useful insight into business operations and as an external party will usually be able to provide tips on improving your cash flow so you do not suffer the same problems in the future. They will be particularly keen to ensure that your credit control and debt collection is working.
Invoice finance is now a powerful form of finance for many businesses and can be utilised to creatively build and grow your company. Cashsolv can offer invoice finance solutions as part of our longer-term new funding solution. We are industry experts with many years of experience dealing with customers in a sensitive and confidential manner and maintaining relationships with your debtors.
For further information on new funding, view the following relevant pages:
- When to use a long term business loan
- New funding options
Which option is the best - invoice factoring or invoice discounting?
If you would like to discuss your options confidentially with one of our experts, contact us now for some no obligation advice.