The recent hike of the OCR caught everyone by surprise. While many households come to grips with what it means for them, businesses will be feeling the squeeze sooner, as many predict we're in a technical recession.
During a recession, cash flow can become a major challenge for many businesses. Both invoice finance and bank overdrafts can provide businesses with a way to manage cash flow during tough economic times, and today we want to share the key differences between the two options that make invoice finance a better choice.
Firstly, during a recession, banks may be more cautious about lending, which can make it difficult for businesses to access traditional bank overdrafts. On the other hand, invoice finance is typically easier to access, as it is based on the creditworthiness of the business's customers rather than the business itself.
Secondly, invoice finance provides businesses with more predictable cash flow than bank overdrafts.
With invoice finance, businesses can access cash as soon as invoices are issued. As sales grow, so does access to cash, which helps to manage cash flow and reduce the risk of late payments.
Bank overdrafts, on the other hand, generally need property security and are historically focused. They may be subject to changes in bank credit policy and forever changing Business Managers, which can make cash flow management more challenging during a recession.
Finally, invoice finance can provide businesses with greater flexibility than bank overdrafts. With invoice finance, businesses choose how much cash to access, which allows them to manage their cash flow in a way that best suits their needs. On the other hand, bank overdrafts may come with more restrictive terms and conditions.
In conclusion, during a recession, invoice finance is a dynamic and often a better choice for businesses than bank overdrafts, as it is easier to access, provides a more predictable cash flow, and offers greater flexibility.
The good news is we have cash available and use a proactive approach to working with you to help you create good working capital solutions.