Article by Regency Finance – Invoice Finance
Invoice Finance is a way for small businesses to get more operating cash in a tight pinch. Working capital is vital for most small to medium businesses to function from day to day. When people are slow to pay, it makes cash tight and can bring things to a screeching halt. Credit isn’t always available to the small business owner either. This makes getting new supplies difficult and dealing with unexpected problems impossible. The worst part is the amount owed by customers would cover these expenses plus. If you find yourself in this type of jam quite often, you may need to consider turning your accounts receivable into cash.
If the term invoice finance is unfamiliar to you, you are not alone. Many small business owners have never heard of the term. Many small companies come with little or no credit of their own. However, they may have customers with an excellent credit rating. That is where this form of financing comes into play. When you submit your current invoices, the company assesses the customer’s creditworthiness, not yours. They want to know if the customer has a strong likelihood of paying the invoice. If they assess it as a good possibility, they will advance a large percentage of the invoice back to you in cash. Once the customer pays the invoice, they deduct their fee from the invoice total and give you the remainder.
Invoice finance frees up operating capital that might not come in for a month or two. For a small business in a cash crunch, getting that capital may be the difference between doing business and going out of it. Some businesses only use the service when they need operating capital quickly. Other companies use it regularly to keep their cash lines flowing. It all depends on how they want to manage their cash flow. The fees for the service do eat into bottom line. However, if you lose business due to having no cash for supplies, you likely lose more than the amount of the fees would cost.
If you have a good dependable list of customers, invoice finance may be something to consider. Since the financing depends on your customer’s creditworthiness, it would not work on a list of deadbeat clients. However, most businesses cannot function with these customers anyway. If you hit a cash flow situation, consider freeing up the capital trapped in your open invoices.
With Invoice Finance, you never need to worry about short-term cash flow problems again. Invoice Finance gives you an immediate interest-free cash advance of 75 – 80% against all your approved invoices with the balance payable when remittances are received.