Invoice Finance for Small Businesses: How It Works & When It Helps Most
Invoice Finance is a cashflow solution designed to help businesses unlock cash tied up in unpaid invoices. Many business owners will be familiar with the struggle to receive payment for their invoices in a timely manner and this can be a particularly hard practice for small businesses.
With many businesses relying on invoice payments to purchase stock and pay their suppliers and staff, 90 days plus can often put a strain on a businesses cashflow. In this blog we will explain how Small Business Invoice Financing works and when it could help you most.
How it works
Invoice Finance is a simple and effective way to increase your cashflow by giving you the opportunity to release up to 90% of the value of your invoices.
Sometimes referred to as Factoring or Invoice Discounting, it allows you to access your money faster; here’s how it works:
- You deliver your goods/services to your customer.
- You send an invoice to your customer and notify us.
- We pay you up to 90% of the value of the invoice within 24 hours.
- If you choose, we can collect the monies owed by your customer.
- Once the invoice has been paid, We release the remaining value of the invoice less any fees.
When it helps most
Any business trading with other businesses on credit terms, including sole-traders, partnerships and limited companies can benefit from an invoice finance facility but there are certain times of the year where it could be of most benefit to you and your business.
Seasonality:
Do you need access to additional cashflow to buy stock before the festive season? Are there times of the year that your business requires extra staff to meet increased demand? By unlocking the cash tied up in unpaid invoices you could make this possible without the need to apply for additional loans or increasing your overdraft.
Growth:
Are you looking to expand? Perhaps you have a Management Buy-Out (MBO) or Management-Buy-In (MBI) opportunity, access to funds can help move the business into a new growth stage help with the acquisition of new premises, expanding your workforce or diversifying your product ranges.
Survival:
One of the most important impacts invoice finance could have on a business is its ability to help it survive. Whether you have a looming HMRC bill, higher than expected energy bills or any other unforeseen costs, invoice finance could help your business when you are experiencing a cashflow challenge. .
Essentially, Invoice Finance can help support your business no matter what stage you’re in. If you’d like to find out more about the benefits and how it can help your business, visit our Invoice Finance page.