Invoice finance is an increasingly popular tool that is used by businesses to boost their cash flow. If you’re wondering if invoice finance is a smart solution for your business then read on. Here are just six of the cash flow challenges that can benefit from invoice finance solutions.
Before we start it’s worth touching on the basic requirements. To use invoice finance your business needs to provide either products or services to other businesses, and you need to manage your payment processes by invoicing for your goods and/or services after they have been delivered.
1. Long or late paying customers
If your payment cycles seem to get longer and longer and the payments are later and later, then consider invoice finance. Big business is renowned for seeking the longest payment cycles possible and small businesses can struggle if their cash flow is locked up in unpaid invoices. Invoice finance gives you access to the cash you are waiting for, allowing you to get on with the challenge of managing and growing your business.
2. The bank wants real estate security
Sometimes it just isn’t viable to secure your lending with real estate. Especially if you are in a partnership or you’re supported by a team of investors. With invoice finance the security is based on the reliability of your customers, so there’s no need to put your property on the line.
3. Your business is new or growing rapidly
Traditional lending has some traditional criteria it needs to meet in order to feel comfortable giving money to businesses. If you’re a new business without a credit history then there’s a fair chance the bank will say no to your requests for finance. And if your business is growing rapidly but you don’t have the cash to support it then you may find that you present too high a risk. Invoice finance simply releases cash you’ve already earned, allowing you to stay flexible and keep moving forward.
4. Early payment bonuses or supplier discounts
If you like to pay your bills on time then invoice finance is a great tool to ensure that you have enough accessible capital in your business to make it possible. For many small businesses, supplier discounts and early payment bonuses can be the difference between profitability and seeing red. If that sounds like you then invoice finance could be a smart solution all round.
5. Cash flow highs and lows in seasonal business
Seasonal businesses are often experts at riding the highs and lows of their balance sheet. It’s tough to survive the quiet season without a credit facility to get you through. For an alternative to an overdraft, or when traditional credit just isn’t enough, invoice finance can offer a great way to get access to cash ahead of the busy times.
6. To manage the day to day cash flow challenges
Cash flows in and out of businesses every day. If you’re running a lean operation and you need to release some capital into your business, then it’s worth considering integrating invoice finance into the way you operate on an ongoing basis. Building the costs into your margins could mean that you can afford to deal with the longer payment cycles that previously made a new customer seem impossible to deal with.
Invoice finance is a great solution for businesses who need to unlock capital that is tied up in unpaid invoices. Healthy cash flow is essential to keep growing, manage day to day costs, and react to the challenges of day to day operation. Invoice finance releases the money that is already yours and ensures that your finances will not get in the way of you doing great business.