Now that pandemic-related government funding is drying up, wholesale SMEs might struggle without the extra cash. Luckily, wholesale invoice factoring is a solution for short-term cash flow issues.
Ignite specialises in wholesale invoice factoring, so we thought we’d take this opportunity to explain what it is and how it can help your business.
What is Wholesale Invoice Factoring?
Invoice factoring involves a business selling its invoices to a third-party company at a discount. The invoice factoring services company then charges the invoice at its full price, which is how it makes its profit. Wholesale invoice factoring is simply this service but for wholesale companies.
A typical price for invoice factoring is 95% of the invoice’s original value. But once full payment is made, the invoice factoring services company releases the remaining invoice amount minus its fee.
How to Get Started with Wholesale Invoice Factoring
Invoice finance options might not be a company’s first thought for addressing cash flow shortages, but there are many advantages. Of course, to assess whether it’s a viable option for your business, it’s worth knowing how wholesale invoice factoring works.
1. Make contact with an invoice finance firm
The first step is to make contact with an invoice finance firm. An invoice finance company will ask that you send your unpaid invoices for products sold through a form on their website, or by calling them.
For example, if you’re a wholesale business, you’d typically send unpaid invoices for large volumes of product sold. Be aware, costs for wholesale invoice factoring vary by industry and volume, so always speak to your invoice finance provider for more specific information.
2. Receive funds
Once an invoice finance company receives your invoice, they verify it and release the funds to your business. As mentioned, this will be up to 95% of the invoice’s value, although it depends on other factors. You’ll often typically receive this within 24 hours.
3. We collect the payment
The invoice finance company then collects the payment from your client as per the contract’s terms. They retain any payment agreements between you and your client, as they are essentially collecting the payment on your behalf.
4. Finalise invoice
When the client makes the payment, the invoice factoring services company then releases the remainder of the funds to your business, minus a small fee. After this, the invoice is considered closed.
Using Invoice Finance for Working Capital
Wholesale businesses work on very thin profit margins, so it can sometimes be difficult to find the working capital necessary to expand. This has become even more obvious recently, as many companies have relied on government funding to make it through leaner months.
But, wholesale invoice factoring addresses these concerns by making money available that’s yours anyway. The only difference is that you get it sooner than planned.
So, if invoice factoring sounds like it could benefit your wholesale business, get in touch with Ignite Business Group. We’re experts in invoice finance and can help your company access funds quickly. Contact us today to see how we can help.