A simple guide to invoice financing
Receive cash for outstanding invoices with invoice financing.
In an ideal world, your customers would pay you what they owe you on time, every time. Unfortunately, we don’t live in an ideal world and many small and medium businesses have to deal with late payments from customers from time to time.
Invoice financing is a way to boost your cash flow while you wait for payment from customers. Basically, you can get an advance on your unpaid invoices.
What is invoice financing?
Invoice financing is a form of funding that unlocks cash that is tied up in outstanding invoices. This form of finances allows businesses to borrow money from a lender against the amount due from customers. You no longer have to wait for your customers to pay their balances in full before you reinvest in operations or grow your business.
Invoice financing gives you the opportunity to improve cash flow, accelerate growth, and pay suppliers and employees.
Invoice financing can be done in two different ways:
- Factoring: you approach a finance company to sell an unpaid invoice. The lender will pay a percentage of the invoice to you. The lender will then receive full payment from the customer and pay you the balance amount minus interest and/ or fees.
- Discounting: A lender offers a large percentage of what the invoice is worth, however, you collect payment from the customer and pay the lender the amount plus interest and/ or fees.
How the invoice financing process works:
When your business sells goods or services to large customers, such as retailers or wholesalers, the customer may not pay immediately. This may leave you in a sticky financial situation, especially if you don’t have the cash flow to pay for the goods or services.
Offering credit to clients can put the breaks on your business’s potential to invest and grow. A finance company can assist your business by buying your customer’s invoice, giving you access to immediate funds so you can pay for your expenses. Here’s how it works:
Why would you use invoice funding?
If you do not have a long credit history or substantial assets, you may struggle to receive traditional business finance through a bank. Additionally, if you do get approved finance, it may take a while to get approved.
Instead of applying for traditional business finance, you can get fast cash from a lender by means of invoice financing.
What are the benefits of invoice financing?
There are many benefits of involving financing, such as:
- Minimise the risk of bad debt
- Keep up with the competitive market
- Increase your ability to make more profit
- Immediate cash for expansion
- Increase margins
- Improve credit rating
- Cash to fulfill bigger orders
- Discounts from suppliers for early payment
- Improve reputation with customers and suppliers
- Funds for emergencies or any sudden increase in orders
How much does invoice funding cost?
Don’t let outstanding invoices hinder your business’s potential and growth. Unahina Solutions offers invoice funding of up to 80%. We charge a single fee for each invoice advance. You can fill in our contact form for a quick, obligation-free quote. Once you accept our proposal, we will draw up an agreement and provide you with funding within five business days.
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