Everything You Wanted to Know About Invoice Finance
Saturday, December 24, 2016, 6:00 PM | Leave Comment
In the business world, it’s all about having cash when you need it.
The business climate has been tough in the previous years, and cash flow problems are not uncommon.
Sometimes, to keep functioning and to make the best of your opportunities, it is crucial that you can access cash immediately, without paying for it through the nose.
Here is the down low on invoice financing – which is one of the ways you can do exactly that.
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How Does It Work?
Think of invoice financing as a way to loan money from yourself. What do we mean by this? Well, it means that you will be getting money today that is due to you tomorrow.
Basically, the investors who give you a loan buy out your outstanding invoices for a fee, and you can access income that just wouldn’t be accessible to you yet.
You usually get a percentage of the unpaid sum in advance, and the rest when your debtors actually pay up the remaining amount.
Unlike with other kinds of loans, there is no collateral in this case, and there are no monthly payments.
Rather, the fee is deducted when your debtors pay the invoices.
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What You Can Use It For
While some businesses resort to using invoice financing as a last resort, when they are deep in money problems, this is certainly not its only use.
Actually, many companies, both large and small, see this as an opportunity to grow and invest.
Instead of taking unnecessary risks, this is a relatively safe way to get your hands on the funds you need to expand and improve your company.
That is why reliable experts from The Invoice Market are a good option to have on your company’s speed dial.
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When You Can Use It
Whether your company is big or small, you can almost certainly take advantage of this funding source.
Most lenders have determined the lowest possible outstanding sum you need to have in unpaid invoices, to make you eligible to apply, and it is usually in the range of a few thousand dollars.
The process is relatively simple and you can usually apply and upload the needed documentation online.
You don’t have to sell all of your invoices, but can rather pick which ones you want to base the loan on, and which ones you are happy to keep.
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What Types of Invoice Financing Are There
There are two types of invoice financing. Factoring is when your financier collects your debts from your debtors for themselves.
You simply sell your debt to the financier and are not further involved in the debt collecting process.
The other type is called invoice discounting. In this case, you pay a fee to the financier and they give you a loan.
Collecting the debts is still your job, but the collected money goes to the financier, as payment for the amount they have lent you.
When in a financial pinch, sometimes the speed and ease of getting the money you need makes all the difference. Invoice financing is one of the simplest and least risky ways to secure the necessary funds.
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Dan Radak is a marketing professional with ten years of experience. He is a coauthor on several websites and regular contributor to BizzMark Blog. Currently, he is working with a number of companies in the field of digital marketing, closely collaborating with a couple of e-commerce companies.
