Funding with Invoice Financing
In the recent article regarding possible challenges faced by SMEs, cash flow is a significant issue that can be faced by many companies, including companies who are making profits. Companies have been traditionally utilising overdraft facilities and business credit cards to improve cash flow – banks issue businesses credit with a fixed amount and for a fixed duration. However, borrowing from banks has its disadvantages such as strict lending criteria and requirement of collateral as security.
Now with the discovery of fintech, funding with invoice trading/invoice financing is a great solution to your cash flow needs.
What is Invoice Finance and how does it improve cash flow?
Invoice Finance is a funding solution whereby businesses sell their outstanding invoices at a slight discount to financier and receive up to 90% of the value of the invoice. It will lead to increase in working capital, which allows businesses to continue to fuel their growth.
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What are the advantages of Invoice Financing as compared to commercial overdraft?
Freeing up collateral
Traditionally, taking up a loan would require assets as security. By using invoice financing, companies can use real estate as security for another purpose such as investment.
Invoice financing trumps overdraft in speed. Invoice financing usually releases cash within 24 hours, while overdraft might take up months for the paperwork to be completed and for the loan to be approved.
At times, in the midst of approval, the loan might be rejected by a financial institution as they review on the past records of the company. Thus, it will tougher for new business or growing business to gain access to loans as their records do not meet the requirements. However, invoice financing facility, being more flexible, only considers the current position before releasing the loan amount.
Invoice Financing provides you with accounts receivable services which help improve cash flow. It also helps your business to operate not only more efficiently, but also the ability to increase sales by utilising additional working capital. The importance of cash flow is summarised in the phrase “Cash is King”. Times has changed. In the past, many businesses turned to overdraft facilities for funding. Nowadays, with its many advantages, more companies are turning to Invoice Financing to improve cash flow.