There is nothing new about small businesses’ cash crunches due to limited budgets. Various restrictions on getting loans from lenders also worsen the situation, and many small businesses are closed due to it. Invoice financing can solve your cash problems if your business is struggling financially.
Here’s how invoice financing can increase cash flow in your business.
What is invoice financing?
In simple terms, invoice financing means borrowing money from a lender against your unpaid invoices. Most commonly, there are two types of invoice financing:
- Factoring is when you sell your invoice to a factor at a discounted price. Here, the customers know a third party is involved as lenders use credit control services to get the payment.
- Discounting differs from factoring in credit control, as you handle the credit control rather than the invoice financing company.
Both these methods of invoice financing are pretty popular these days.
Why does your business need invoice financing?
- Quick access to cash: One of the most significant benefits of business invoice financing is that it gives you financial freedom. You no longer have to wait for invoice due dates or loan approvals to get the cash you need for your business. Invoice financing is one of the fastest ways to get short-term funds in the current scenario.
- Releases tied-up capital: Usually, there is a window of 60-90 days before the invoice becomes due and the customer pays it. However, it is a long window for a business, especially if the amount is high. Through invoice financing, you can receive the money before the waiting period and use the funds for grasping opportunities you would miss due to a lack of sufficient funding.
- Reduces bad debts: Another pain area for many startups and small businesses is unpaid invoices past their due dates. As a small business, you may not have the time and resources to chase these invoices, so you write them off as bad debts, which is a loss to your firm. If you get such invoices financed, the invoice financing or factoring company will employ their debt collection methods that are more effective and can get the money for such invoices quickly.
- Simple repayment terms: If you get your invoice financed, you don’t have to pay the invoice until it is due, so there is no additional burden on you to return the money. You can repay the lenders when your customers pay for the invoice.
- No debt accumulation: Unlike other forms of borrowings, there is no debt increment with invoice financing. You can maintain your level of debt while enjoying access to increased cash flow in your business, making it better than traditional business loans.
About Ignite Business Group
If you are looking for reputable and reliable invoice finance 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 in by providing essential information and invoice copies here. Reach out to us at 01332 896 020 or fill out our online contact form to know more.