Cashflow is one of the most common problems for small businesses. An unexpected cost arises or you have a sudden dip in turnover and all of a sudden you can’t pay all of your bills.This is where invoice financing comes in. Essentially, it’s an arrangement where a financial institution will lend a business a portion of its unpaid invoices. This way, the company won’t have to wait for their clients to pay and can use this money straight away. The lender will then be repaid this amount (along with the agreed fee) when the client pays their invoice.
It’s an effective tool that can be the difference between success and failure of a small business. If you’ve been looking for a solution to your cash flow problems, we’ve put together 5 benefits of invoice financing for small businesses that just might convince you to take this route.
1. You have control over the loans
Unlike other loans where you need to lock in a certain amount and timeframe upfront, invoice financing is flexible. It’s up to you to determine the amount you need and when you need it. For instance, you can choose what invoices to use for invoice financing and what portion of each invoice’s value you require.
2. Repayments aren’t due until you get paid
With most invoice financing, repayments for the debt aren’t due until you receive the invoice payment from your client. There aren’t typically any fixed repayment dates or amounts. Instead, you repay the debt when you are given the money you were owed. When it comes to cash flow, it doesn’t get much easier than this!
3. You have access to money without increasing long-term debt
Invoice financing is an effective tool for cashflow as it offers a short term lending solution. You don’t have to sign up for a lengthy loan that will take you a year or more to pay back, adding to your pile of long-term debt. Invoice financing allows you to repay the debt as soon as you have the money, meaning you can wipe the slate clean as soon as you are in a financial position to do so.
4. It’s quick and simple to apply for invoicing
Invoice financing usually has a straightforward application process. There’s no lengthy paperwork or extensive credit checks, and in most cases, you can complete your entire application from your computer or handheld device. If you need a quick and easy solution to a cashflow problem, invoice financing is for you.
5. You won’t have to wait to access the funds
Just as many lenders have a lengthy application process, they also usually have an extended approval period. With invoice financing, you often get the money within a couple of days of applying for the funds. This means you can get the cash when you actually need it, rather than waiting for a tedious process.
As you can see, there are a range of benefits associated with invoice financing if you are a small business. It’s a fast, easy way to get that much-needed cash boost when you find yourself in a tight spot and just need some extra funds to get you through. Always remember to check the terms and conditions as different lenders will charge a fee for their service, although this amount will be minimal in comparison to the interest charged on other loans.