Cash flow is often a major problem for businesses and in a lot of cases it can be down to late paying clients and unpaid invoices. Apart from going down the traditional route of a bank loan, or an overdraft what can you do to address the problem? Invoice finance UK is a brilliant means of getting a cash injection without too many of the concerns and complications which often come with a standard bank loan.
What is invoice finance
Invoice finance is a general term, which is used when you raise money from a factoring company against the value of your unpaid invoices. The factoring company will advance you money, which tends to be between 70-90% of the value of your unpaid invoices. When the invoice is eventually paid, the factoring company will take what they’re owed along with their fees, before returning the remainder of the balance to you.
So why exactly does invoice finance help with cash flow?
Number 1: Can get the money very quickly
With the majority of factoring companies, a business is able to get a cash injection worth up to 90% of their unpaid invoice. Typically, this can be paid within a day or two issuing invoices. If a business is really struggling with cash flow troubles and need the cash to pay debtors, then it can be a quick and easy solution.
Number 2: Bookkeeping takes care of itself
If you are using a factoring facility, the factoring company will usually manage your ledger, which means they will chase payment and manage your credit control. The factoring company will collect the unpaid invoice and take care of how the cash is repaid and then distributed.
With an invoice discounting facility you retain control of the ledger.
Number 3: Time to work on other things
With bookkeeping effectively taken care of, a business owner who has previously been stressed trying to chase down late payments, will now have the time to put effort into other areas of the business.
Number 4: Invoice Discounting can be used for discretion
If you feel slightly insecure about having a factoring company collect your invoices and believe that it could impact negatively on your business, then invoice discounting may be the answer. Normally, however, this is for larger businesses with well-managed ledgers and established credit control systems in place who prefer suppliers or clients not to know they are using a factoring company.
Number 5: A business only has to make repayments when the money comes
If you were to go down the route of using a traditional bank loan to help solve cash flow problems, then the repayments can be a massive hurdle when it comes to moving the busine ss forward. When it comes to invoice finance, it’s simply not something you have to worry about. The factoring company will take care of repayments, and there aren’t any fixed-term repayments to be made, which is only good for managing cash flow.
Invoice finance UK can be a brilliant way of helping a business get through its cash flow troubles, with the cost of factoring often even cheaper than the interest charged from a bank loan. However, it can only be applicable if a business has invoices which are good enough to be factored.
Easy to get a hold of and a great way of taking the pressure off yourself, invoice finance might just be what your business needs.