Business owners are well aware of long-payment cycles and payment delays, and their effect on their cash flow. The process gets even longer if you have customers who want long payment cycles and won’t pay until well after their due dates. One way to overcome this time gap in the payment cycle is by financing your invoice. Invoice financing is an excellent way for many businesses to manage their late payments.
Here’s what you need to know about invoice financing.
What is invoice financing?
Invoice finance is a collection of methods used to monetise your outstanding invoices. In a broader sense, it is short-term borrowing through trading your invoices as collateral to an invoice financing company. This way, you get paid for invoices within days that have a payment cycle for months.
What are the various types of invoice financing?
There are several forms of invoice financing that you can choose from for your business. They are:
It is one of the most popular forms of invoice financing in business today. When you factor in your invoice, you can get up to 80-90% of the invoice payment up front, and the rest after the customer pays the invoice. The financing agency charges its fee by deducting it from the invoice amount. The financing company also takes credit control in most cases.
Unlike invoice factoring, invoice discounting doesn’t come with credit control. The financing agency keeps your invoice as collateral and lends a certain amount of the invoice to you. You have to manage your creditors and chase the invoice.
Invoice trading is a more recent concept involving selling your invoice debt to other companies or investors through various online platforms. It is riskier than traditional invoicing, but investors who want to earn greater returns go for it.
Why does my business need invoice financing?
There are various reasons for your business to use invoice financing. The significant benefits include:
Retaining your valuable customers
If you have frequent customers who make up a lot of your revenue every month, you don’t want to lose them just for long payment cycles. However, waiting for payments for 90 days can put you in a fix. Invoice financing can help you get the money quickly without losing your customers.
Having a better cash flow
You need money to pay your suppliers, handle the production and shipping costs, pay your employees, and much more. Without regular cash inflow, all that becomes challenging to manage. Invoice financing can ensure that you have a steady influx to manage your business efficiently.
Seizing the business opportunities
Having money in hand gives you the flexibility to make quick decisions that allow your business to grow. You don’t have to wait and worry about funding from external sources.
About Ignite Business Group
If you are looking for a reputable and reliable business to get invoice financing in the UK, Ignite Business Group Ltd should be your first choice. With over 25 years of experience in the field, we can take care of all your invoice troubles. You can quickly get your invoices discounted or factored by providing essential information and invoice copies here. You can reach out to us at 01332 896 020 or fill out our online contact form to know more.