If you run a small to medium-sized business then you might want to find out more about invoice finance. Because invoice finance (also called invoice factoring) is adaptable to many different situations and needs: making it a great tool to have on hand if you hit cash flow problems. But don’t take our word for it – read on and discover 10 of the ways that invoice finance could work for you and your business.
1. Don’t let being new hold you back.
If your business is new then the chances are that you will struggle with traditional lending options. That’s because in most cases you’ll either be asked to use personal assets as security against your lending, or you’ll be asked to show accounting figures that demonstrate a number of months of operation. So how do you get access to cash if you don’t have sufficient personal assets (or you’d rather not use them as security) and you’ve only just started up? Invoice finance is a straightforward solution. The finance is secured against the value of your unpaid invoice, and there is no need to demonstrate trading history or use personal assets as security.
2. It’s nothing personal but…
It’s no fun when business gets personal, and that’s how it can feel when you’re asked to offer your personal assets up as security on your business finance. But with confidence in your business success you just might be convinced that this is the right way to move your company forward. The problem is that external factors that impact the economy can also negatively impact your business. If issues like the Global Financial Crisis hit, you can suddenly face losing your property when your company fails. Before you commit yourself to offering personal assets as security, take a look at invoice finance. The only security required is the invoice you acquire finance against. So if you have orders, and invoices in play – it’s worth finding out what your options could be.
3. Take the money and grow.
If your finance options are linked to fixed assets, you might find that the funds available start impairing your ability to grow as opportunities arise. That’s where invoice finance is different. If your business is growing then your sales are too – meaning that you have more invoices available and therefore more cash ready to be released into your business. You will be able to grow as your business does by accessing your own cash as you need it.
4. When you just have to have it.
Internal growth is not the only growth opportunity that invoice finance supports. Imagine that an opportunity to diversify your business by acquiring a competitor or another business becomes available, and you have to move fast to secure it. Invoice finance offers you quick access to cash so that you can react to opportunities as they arise, and seize them when you want to.
5. Don’t be kept waiting.
Slow paying customers can make it impossible to manage your cash flow effectively and keep your business running. That’s why some companies turn business away because they just can’t support long payment cycles. Slow paying customers create a lengthy gap between acquiring raw materials and getting paid for the end product. But with invoice finance there’s no need to wait. As soon as you create an invoice you can apply to receive the cash you’ve already earned. Invoice finance turns payment cycles from days to hours, and gives you access to cash when you need it.
6. The loss of a customer.
Losing a customer suddenly to competition or insolvency can easily throw a company’s cash flow into crisis. Especially if there is a heavy dependence on that customer. Invoice finance gives you access to the cash you need to keep the business running while you assess your options and review your opportunities.
7. Riding the seasonal ups and downs.
All businesses feel the impact of the seasons to a greater or lesser extent, and invoice finance can smooth out the peaks and troughs in performance to ensure that cash is available when it is needed – goodbye seasonal cash flow problems! The ability to access the money you have already earned allows you to support your cash flow during the quieter months and react to higher demands during the busy months. And if you’re facing a gap between payments over Christmas, invoice finance can help with that too.
8. Maintaining balance in Business Partnerships.
When creating business partnerships equality is important. Unfortunately funding requirements can undermine that – especially where personal assets are involved. If one Business Partner is unable to provide sufficient personal assets to support funding, and the other ends up shouldering most of the responsibility, it can create an unequal partnership and long term issues. Invoice finance gives your business access to finance without securing funding against personal assets, so you can keep your partnerships equal and your assets to yourself.
9. The ‘D’ word.
If your business finance is secured on personal assets, but you undergo a divorce and subsequently half the value of your assets, you could find that neither party has sufficient equity to secure the business funding you need. Invoice finance does not require personal property for security, so the business can maintain its funding without being negatively impacted by divorce proceedings.
10. When it’s over…
Whether you’re in a family business and you need to support succession, or you’re supporting a management buyout: changing business ownership requires cash. And when finance has previously been secured against personal assets, a new owner may not have the security required to raise funds. Invoice finance offers an excellent opportunity for new owners to manage their cash flow – in some cases to support the costs of acquisition – without the requirements of securing loans against personal property.