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Text: 2021 Statistics for Singapore SMEs

How to Leverage Invoice Factoring to Boost Your Business Growth

Businesses today have learnt how to best leverage invoice factoring to inject more cash flow without taking on more debt.  Whilst business loans create a liability on your balance sheet, with invoice financing, merely converts your existing current asset (accounts receivable) into cash, leaving your balance sheet looking pretty.

No monthly payments

Invoice financing works differently from business loans.  Whilst a loan comes with the obligation of regular monthly repayments, invoice financing is a self-liquidating financing product. This is how invoice financing works – it provides you cash upfront on your outstanding invoices instead of waiting 30, 60, or even 90 days for your customer to pay.  As and when your customer pays the invoice, the financier will then apply the funds to settle the financing.

Confidence to take on the next big project

Do you feel a little anxious about whether you have sufficient working capital to support your next big project?  Sometimes its initial outlay might be a little bit too large for you to chew.  Invoice financing allows you to unlock cash flow as and when needed so you don’t have to stretch yourself too thin. 

Flexibility, drawdown as and when you need

Invoice financing gives you the flexibility to draw down when you require it and also the amount you wish to draw.  We understand that the cash flow needs of every business are different.  Invoice financing is a finance facility that you can feel relaxed about without having to worry about minimum drawdowns, utilisation, or contractual lock-ins.   

Useful tool to better negotiate with suppliers

Having an invoice finance facility means your business will have full control over when you get paid on your invoices.  Having cash in hand gives you more muscle to better negotiate pricing with your suppliers by offering to pay them quicker or taking advantage of early payment discounts.

Automated bookkeeping

With InvoiceInterchange, we are fully integrated with Xero accounting software.  This means you no longer have to worry about bookkeeping your financing transactions as they are automatically posted to your Xero ledger from the InvoiceInterchange platform.  This integration gives you more time to focus on your business growth.

Facility that grows with your business

Unlike business loans, your invoice financing credit limit grows with your accounts receivable.  The more invoices you have, the more you can drawdown.  The correlated scaling of your invoice finance facility makes it easier for you to capitalise on opportunities to grow.

How to pick an invoice financing provider

Now that you are aware how you can leverage invoice factoring to your business, how do you go about selecting the right finance partner?  A few things to look out for:

Fee structure

It is important to understand the full cost of financing and all fees involved.  At InvoiceInterchange, our fee structure is transparent and straightforward.  There are 2 fees – (1) Transaction fee, a once-off flat fee for each drawdown, and (2) Discount fee (interest).  There are no other fees.

What products are available?

Invoice financing can be further broken down into multiple product variations.  From contract financing, PO financing, whole ledger financing, spot factoring, confidential vs disclosed facilities.  Check out our previous articles for more on these variations and see what suits your business best.

Funding process and speed

Ask your potential financing partner how their drawdown process works and how fast can funding requests be processed. 

At InvoiceInterchange, we have a purpose-built platform that allows you to drawdown against your outstanding invoices with a few clicks of a button.  No more cumbersome processes and paper requirements.  Funds can be in your account within 24 hours!

Debtor relationship

You might want to find out how your invoices will be followed up for payment. Will reminders or chasers for payment be done by your company or by the invoice financing company.

If you want to find out more, speak to one of our friendly team members about invoice financing. 

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