Benefits of Invoice Finance
It is common knowledge that when a company invoices another, it generally takes anything from 30 days to 120 days (sometimes more) before that company receives payment from its debtor. This can have an impact on business and stop them from continuing to trade, together with stopping their progess to reach their full potential. Keeping on top of your financial management is absolutely vital for a business trying to grow and be successful. An invoice finance facility could be the key. Invoice Finance is a group of funding solutions for SMEs looking to grow, or maintain their cash flow and working capital balance. The main benefit of an Invoice Finance facility is that it massively increases your cash flow potentials. It removes the need to wait out lengthy payment terms, and ensures once work has been completed and an invoice is raised, you have those funds in your business account within 24 hours. This means once you have completed said work, you immediately gain the income. Factoring is a cash flow funding solution. It releases an agreed percentage of unpaid invoices as soon as the invoice is raised (usually within 24 hours). This percentage can be as high as 100% of the value of your invoice, although this varies dependant on multiple factors. The key factors in deciding your prepayment value are your sector, your revenue, and your business profile. There are two fees involved in Invoice Financing: the service fee, and the discount fee. These are equivalent to the interest payments in other products, such as business loans.
A Factoring facility will generally operate on a disclosed basis, meaning that the company’s debtors are aware of the providers involvement. Factoring allows for an immediate injection of cash into the business, especially if you have a large amount of money tied up in invoices at the time of application. This will increase your cashflow, allowing you to run business more smoothly. Almost all sectors and industries can access Invoice Finance facilities as long as your company trades with business to business sales via invoices.