How to use invoice finance for growth

Bank finance is not an option if you are a new business with no trading history and do not have property to offer as security on the loan.

Is Invoice Finance the answer?

Cash flow finance or accounts receivable funding is an unsecured cash advance that you receive on your outstanding invoices, which act as collateral. Once your account is approved and set up, the lending company will pay your invoices within 24 hours. Most business owners would agree that 'slow-pay' or 'no-pay' customers can be a death knell for a business.

Does this sound familiar?

• your customers are paying invoices at 60,90 or 120 days
• the bank said NO to your business loan
• your cash flow is a constant challenge
• your recent capital purchases has restricted your cash flow
• your business credit score is unacceptable for bank approval
• your company struggles to meet the payroll

8 Benefits of Invoice Finance

1. fast approval
2. instant cash
3. manage cash flow gaps
4. not shown on your balance sheet
5. creditworthiness based on your customers  
6. negotiate better supplier terms
7. no financials and no property security
8. disclosed or non-disclosed

How much does it costs?

Yes, getting a bank loan is a cheaper way to cash flow your business, but if your cash flow challenged and unable to make payroll then factoring your invoices may be your best option. Your factoring rate will be dependent on the following;

• sales volume
• size of invoice
• creditworthiness of your customer
• number of days the invoice is outstanding
• your time in business
• relationship with your customer

What industries suit invoice finance?

1. Manufacturing
2. Importing 
3. Labout Hire
4. Wholesale
5. Transportation
6. Professional and Consulting Services

Best practices to manage your cash flow

If you are going to extend credit to customers, request at least three references and contact them. If you have slow-pay or no-pay customers, begin collection procedures as soon as they are late. If you delay trying to collect, it hampers your ability to collect.

• offer a discount for early payment of the invoice
• aim for an upfront deposit to maintain your cash flow
• be proactive and have a process in place to manage bad debt 
• keep the communication channels open with your slow-paying customers