If you’ve always been wary of securing financing for your business needs because you’ve been warned about the potential dangers of borrowing for your business, there’s an option you may want to investigate. Specialised companies such as Close Invoice Finance provide the modern and more practical solution for more and more businesses these days.
What Is Invoice Finance?
Invoice finance is a form of asset based lending offered by many reputable financing institutions – including RBS, HSBC and Close Invoice Finance. Offering a range of flexible and affordable options, it allows businesses to obtain cash against a percentage of their receivables. Two of the most popular types of invoice finance are factoring – where the lender takes care of collections – and invoice discounting – wherein you collect the receivables yourself and pay advances to the lender through dedicated accounts.
Benefits Versus Traditional Credit Facilities
Almost every businessperson would be aware of traditional financing options– both the good and the bad. Those with low interest rates (such as overdrafts and bank loans), have plenty of reporting requirements – like historical reports of sales performance, a listing of assets, as well as red tape and long processing times.
On the other hand, there are other traditional (yet a little bit less reliable) sources with faster processing times and fewer reportage requirements; but these may have prohibitive interest rates, which, if unchecked, may be your downfall. Companies such as Close Invoice Finance, on the other hand, offer faster processing times and fewer requirements; practically, the only requirement is a healthy sales ledger that shows the minimum required turnover or sales.
Security And Planning
With traditional options, accounts receivable can be a source of insecurity, since there is no way to tell when, or even if, you will be able to collect. It is an insecurity that is heightened with the payment commitments that you are required to meet. Whether it is weekly, semi-monthly, monthly or quarterly, it creates a huge stress making sure there is enough in the till to pay increases as the cut-offs draw close. Invoice finance allows you to know your cash flow projection in detail, enabling you to make business plans that will allow you to grow, instead of simply keeping up with commitments.
Reputable finance providers, such as Close Invoice Finance, include in their services the collection of receivables (in the case of factoring) as well as credit check services on your potential clients so you can avoid bad debt. Unlike traditional facilities where the problems posed by a non-paying client are heightened by the prospect of you being unable to pay your debt to the financier, invoice finance removes that added burden, should your customer be unable to pay.
Flexibility
There’s also the added worry when debt repayment deadlines and overdraft limits draw close: invoice finance can eliminate that headache. Being a flexible facility¬ (which means as your invoice values grow, so does the facility), there is no need to keep applying and reapplying. Whether you opt for factoring or invoice discounting, you are assured of a series of cash advances that increase as you sell more and your turnover increases.
Mark Tull Money 