Many UK businesses make use of invoice financing, for various reasons. It might be to smooth out seasonal cashflow or deal with unforeseen requirements for additional working capital.
By simply assigning sales invoices to an invoice finance service or invoice finance agent, a business can quickly and easily access much needed working capital to ease any short-term cashflow problems.
Suppose a company has sent an order for lamps to a customer on the other side of the ocean; while the order arrives and the customer confirms receipt and pays the invoice, two months may well pass. The problem is that, during those two months, the supplier has to keep paying the salaries of its employees, the rent of its facilities or the supplies of its own company. This is where a factoring or invoice financing company can be useful.
But if the cash flow situation of the company is even more strained, the supplier of lamps in the above case might not even have the funds to buy the materials with which he manufactures the order received, thus losing a sale due to lack of cash flow. If this is the case, it will have to be a PO Financing (Purchase Order Financing) company that will be in charge of providing the necessary liquidity to complete the operation, buying the raw materials and machinery or the engineering or other services needed to obtain the final product.
Here are some of the main benefits of using invoice financing as an alternative finance solution for your business.
- Invoice finance can contribute to better cashflow
- A business can access between 80% and 90% of the value of its invoices instantly
- Cash obtained can be on a continual basis, providing confidence for growth
- Invoice finance is a scalable finance solution – as sales and the business grows
- It eliminates any uncertainty regarding when cash will be available for operational expenditures
- Interest is only paid on the actual amount used; not necessarily the entire line of credit based on the value of invoices submitted
- Confidential invoice financing is available so your clients never need to know your business is making use of such a service
Invoice discounting brokers
How can your business access the best invoice finance solutions based on the type of business and sector you operate in? There is a wide choice of invoice and factoring finance solutions available in the UK, but getting the right one in place can make it possible for even the smallest business to compete with much larger competitors.
Making use of an invoice finance broker offers the opportunity to make sure you get the best invoice financing deal based on the specifics of your business. Using a broker offers various advantages, such as:
- Reduction in time required to access the most suitable invoice finance service
- Elimination of the need to complete multiple applications and pre-approval forms for multiple lenders
- No requirement to pay fees, as the majority of brokers are commission based, paid for by the invoice discounting service provider – not your business
- Access to the most up to date and most competitive terms and monthly rates in the market
- Possibility of wider choice of invoice finance providers through established broker-agent relations
- In-depth knowledge to ensure best fit service provider for business start ups, established enterprises and other business profiles
- Tailor made solutions can often be brokered rather than simply off the shelf, one size fits all invoice finance services
If you think your business could benefit from using invoice financing to ensure cashflow stability and free up valuable resources to drive growth and expansion, it may be time to consider incorporating an invoice financing solution as part of your overall business strategy.