Invoice finance is a financial service that allows businesses to access the money they are owed by their customers, rather than waiting for payment to be received. This can provide businesses with a much-needed cash injection to help them meet their financial obligations and grow their operations. Here are the top three ways that invoice finance can support your business:
Improving cash flow
One of the main benefits of invoice finance is that it can help to improve your business’s cash flow. By releasing the money that is tied up in unpaid invoices, your business can access the funds it needs to meet its financial obligations, such as paying employees and suppliers. This can help to reduce financial stress and allow your business to focus on growing its operations.
For example, let’s say your business has a $100,000 invoice that is due in 60 days. Instead of waiting 60 days to receive payment, invoice finance companies can provide up to 80% of the invoice amount within 24 hours. This allows your business to use the funds immediately to pay bills, expand operations, and more.
Flexibility
Invoice finance can also be a flexible form of financing. Your business can choose to finance all of its invoices, or just a portion of them, depending on its needs. This can help to ensure that your business only accesses the funds it needs, when it needs them, reducing the risk of taking on too much debt.
For instance, if your business has a strong cash flow but needs additional funds to fulfill a large order, invoice finance can provide the necessary funding without taking on additional debt. This can help your business grow in a sustainable way.
Cost-effective
Invoice finance can be a cost-effective way of obtaining funding, as the cost of borrowing is typically tied to the value of the invoices being financed. This means that your business only pays for the funding it uses, rather than a fixed amount. Additionally, invoice finance providers typically charge a lower rate of interest than traditional lenders, making it a more affordable option for your business.
For example, a traditional bank loan may have an interest rate of 10%, while invoice finance providers may charge only 1-3% on the invoice amount. This can make a significant difference in the overall cost of the funding.
In conclusion, invoice finance can be an effective way for businesses to improve their cash flow, gain flexibility in their funding, and access cost-effective financing. It’s important for businesses to carefully evaluate their options and choose a provider that meets their specific needs. It’s also important for businesses to ensure that they have a good credit rating and a strong financial track record. Having this will make it easier to secure invoice financing at a reasonable rate. It can be a powerful tool for small businesses looking to grow and expand, providing the necessary funding to meet their financial obligations and capitalize on new opportunities.
Get in touch with us at Funding Bay for your invoice financing needs.
Check out our invoice finance calculator here.
