There are many issues that a small business owner may face, but one of the most commonly reported is the recovery of money from customers. Cash sales are good, but the settlement time can sometimes be problematic when you make sales on credit. It’s a fact of business that some customers take longer to pay and some may never pay, this is an unhelpful situation, and for a small business owner where funds are limited, it becomes a real problem.
One solution to dealing with this issue is to consider invoice financing, a service that can be arranged by various invoice finance brokers. A key benefit of using a service such as this is that you keep your cash flow looking healthy and can honor your business’s commitments.
Selling You Invoices: Is It Real?
This method of funding is not like other types of business finance. Using this method, you engage an invoice finance broker who will help you find a lender that best fits your company. The invoices which are unpaid are then factorized by the lender, and you get the cash. The normal procedure of payment through invoice financing is in two installments. The lender pays you the first invoice when he purchases your invoice, and further payment is made when the customer actually pays. There are many steps involved in this process which are listed below.
Steps To Finance Through Your Invoices:
- Goods or services are sold to the customers
- The invoice is delivered to the customer
- If the customer is not paying, the invoice can be sold to a lender
- The first payment is received by the client
- A further percentage payment is received when the customer actually settles the invoice
Benefits You Derive Form Funding Through Your Invoices:
This is a simple process of getting instant funds from lenders when you are struggling for cash. For business growth, this is important to keep your capital alive and funds positive and applies to any size of business, giving them positive cash flow. Many people consider taking out loans from banks as a possible option, but the problem with a loan is that the process is in-depth and lengthy. Moreover, there is likely to be more paperwork involved with a bank rather than working with invoice finance brokers, as the broker will already know the processes and pitfalls.
Comparison With Bank Loans And Running Finances:
Banks usually take a great deal of time when sanctioning a loan, but brokers can do this quickly because what they offer is not actually considered a loan. Knowing when your business could benefit from this service is crucial, as you would not want to factorize your invoices for no reason. This should be only done when there is an actual need, and this should be assessed by the finance department of your company, alongside someone with experience in providing invoice finance.
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