Maintaining a healthy cash flow can often be the difference between success and failure for a business. This is particularly true for businesses that sell products or services on credit terms.
This is where the power of invoice financing can help by bridging the gap between the period when a sale occurred and when you finally receive payment, which can be more than 30 to 60 days. Here are some advantages of invoice financing:
Immediate cash
Unlike traditional loans that introduce debt onto the balance sheet, invoice financing offers another way. Borrowing against your invoices means that you can gain access to the money you are owed immediately. You can then deploy it faster into your business.
Repayments aligned with inflows
Unlike a conventional loan that might be paid down monthly, invoice finance can align with your sales cycle. Repayments are only made when the original invoices are settled by your clients. This means that businesses only need to meet their repayment obligations when they are paid. This can help ease the burden of fixed-term repayments and increase cash flow flexibility.
Help larger contracts
When your business grows, you will typically find that the size of the contracts you are receiving will also grow. However, larger businesses and organisations normally have worse payment terms. Invoice finance allows you to capitalise on these larger contracts while still managing your cash effectively with larger clients.
Business growth
Sustained growth will rely upon steady cash flow. Invoice financing frees up business owners to channel their efforts into attracting new clients and driving sales, rather than chasing unpaid invoices. It also enables the extension of credit lines to customers, strengthens supplier relationships, and allows businesses to focus on growth.
Fast approvals
One of the biggest advantages of invoice finance is that the application process is incredibly streamlined. Oftentimes, businesses are able to select the unpaid invoices they would like to finance and get them funded quickly. Once the process is set up initially, ongoing funding is quick and easy for most businesses.
Reducing risks
Late payments and bad debts pose significant threats to businesses. Legal recourse is an option, but it's expensive and time-consuming. Invoice financing addresses this issue by conducting independent credit checks on debtors. Many invoice financing providers even take out insurance against non-payment.
