Financing your business comes in many different forms and can vary from what you assume to be available. The standard business loan is of course the traditional form of finance, however not every business is eligible or even needs to take out a large chunk of working capital over a long term. Sometimes it’s just a little cash flow needed to help see you through the next couple of months. Invoice Finance at your service!
Invoice finance is quite simple. You essentially sell your invoices to a third party provider who will then directly pay you up front what you are owed. They will then deal with your customers directly to collect payment and will charge you a small percentage fee on the total amount. For some businesses that can be a suitable way of helping your cash flow stay healthy and keeping the business running smooth. If you are a business that sells bulk products to retailers this can be perfect. For example, you are a food manufacturer and a large supermarket wants to purchase your product. They place the order with you and the invoice totals to £220,000. You now ship the order across and this is a huge chuck of your stock, you need to restock on products but your cash flow is tight and your customer has 90 days to pay so you may have to wait for the payment. You now sell on your invoice to an invoice finance provider who will pay you upfront the total amount of the invoice minus the fee. You have now been paid and you can leave payment to be dealt with externally by your customer and you can happily continue trading and restocking for your next big order. So you can see how this benefits you in the short term. A lot of providers such as MarketInvoivce have an online system which once you are up and running on, simply allows to upload invoices as and when and work with them on a rolling term. You only have to use your provider when you need to.
Sometimes the going can get tough in business and cash can become stressful at times, but it’s best to remain calm and consider your options first before you make a decision that can stack up onto your current liabilities. Taking out a business loan to help you with cash flow troubles can seem like the best thing to do but consider invoice finance first if its payments you are waiting on. You cut out adding debt onto the business, as well as having to secure business assets to the loan. A lot of providers can offer payment within 24 hours as well as ranging from as little as £5k up to £3m. Always consider the different options available to you before you go with your first protocol as you may find that another avenue of finance can suit you better, and allow you to not tie yourself down into any long term repayments.
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