5 Reasons to Consider Invoice Finance Over Traditional Loans and Bank Overdrafts seonorth, September 14, 2022July 31, 2024 Invoice financing has evolved into a secure method for businesses to expand and support their cash flow. This additional funding can be used for day-to-day operations or business growth. Invoice financing shows that you’re planning for your company’s future and making sound financial decisions. Before we go any further, let’s go over what invoice factoring is and how it works. Invoice factoring is a type of financing in which a business owner sells unpaid customer invoices (or accounts receivable) to a factoring company in order to gain quick access to funds. Prior to the payment terms, the business owner receives cash for the invoice amount, less a factoring fee. Looking to raise some cash fast? If you need cash quickly, invoice finance could be the right solution for you and your business. Here are five reasons why you should consider invoice finance over traditional loans and bank overdrafts. 1) Increase your turnover and buy more inventory. By negotiating an invoice finance agreement, the cost of goods for your business is often covered. This means that you can enjoy instant credit from your supplier, which will enable you to increase turnover and buy more inventory. A word of caution: invoices are typically paid off over a period of time – so this might affect cash flow in the short term. With that said, if you think this could be beneficial for your business, then we recommend speaking with a specialist who can run through all the pros and cons with you. 2) No long-term commitments. Signing up for invoice finance may seem like a pretty hefty investment, but the truth is that with invoice finance solutions, you’re not making any long-term commitments. You don’t have to sign a lease on office space, purchase any equipment or come up with business license fees. All you need is an idea of what you want your business to do, and when the time comes for it to grow out of the invoice financing system (usually six months or so), your success will speak for itself. The system makes it so that your cash flow is unaffected even if there are slow periods where no work is coming in because one billing cycle can offset another. It’s all about getting cash when you need it, without being obligated forever by signing contracts. 3) It doesn’t incur new debt. Invoice finance is one of the quickest ways to secure the cash you need. All you need is your credit rating and the goodwill of your customers. There are no deadlines for repayment, with different models for monthly payments that won’t interfere with day-to-day business operations. You don’t incur new debt, so it has a lower risk of default than loans or overdrafts from a bank account. Plus, it gives you instant access to funds that are typically deposited directly into your bank account. 4) Coincidental growth. Typically, the fastest way for a business or entrepreneur to obtain financing is by borrowing money from a bank or investor. However, this can take a significant amount of time and paperwork, not to mention restrictive stipulations on borrowing as well. Borrowing from friends or family is also an option, but you need someone with substantial capital that you can rely on long-term. 5) Faster way to take short-term finance. If you’re looking for a faster way to take on short-term finance, you might want to consider invoice finance. This is a rapidly growing industry of invoices being financed in the last year alone. What does this mean for you? Well, it means that if you need cash fast, invoice finance could be the solution for your needs – as long as your invoices are of interest to investors. Author seonorth View all posts