Well intriguingly it is one of the most flexible form of business cash flow finance, often offering the most availability in terms of limits too.
Have I got your attention?
Businesses need cashflow, or some call it working capital. It's the lifeblood of any business. With increasing credit terms, how do you pay your staff weekly or your supplies monthly when your customers are paying every 60 days or even more?
How do you get your banker to increase your overdraft (which is after all what most businesses use for working capital) if the equity is low? Or there’s no more left in the private house? Or maybe there is no house to put in? Or the assets are all leveraged?
What if you owe tax? Tax arrears? In the current economic climate quite often the answer is that you cant.
So look at your debtors, how much is owed to your business right now? If you had 80% of that into your bank account right now, how would that improve your business?
If you had 80% of each invoice into your bank account within 24 hours, how would that improve your business?
Invoice Finance its simply using your invoices to secure a facility that puts reliable cash flow through the business on a regular basis. There’s even a product that will help chase and collect your debt too. That's removing the need for administration in your business and handled by friendly professional trained staff.
This could improve not only your collection days, but decrease slow paying customers.
That increased cash flow could help you negotiate better deals with your suppliers.
A dollar saved on expenses is a dollar made in profit.
Best of all.
No changing banks to get all of this done. Debtor Finance will work with your existing bank to get your funding structure sorted.
So how it works:
- Your business issues its invoice to its customer - no change to you there, lets say for $10,000
- The business issues a duplicate invoice to the invoice finance company (not an actual invoice but electronically through your accounts system, saving time)
- The invoice finance company can release up to 90% of the invoice value to you, so lets say $9000 back to you within 24 hours
- The customer then pays the invoice, to an account owned by the invoice finance company, in full
- The invoice finance company then reconciles this invoice with the borrowing to your business and releases the remaining 10% less any charges.
Now imagine doing this every single week of your business.
Imagine the ease of that cash flow coming through.
If your customers aren’t paying the invoice finance company issues the statements and polite calls on a regular basis, in a professional manner. Your business does not have to spend expensive time and money chasing the debts anymore. In smaller businesses it allows the sales and credit collection functions to be separated, often done by the same person, the collection often ignored in favour of trying to make a sale.
If you aren’t concentrating on collecting money any more what could you do with that time?
Explore new opportunities?
Grow the business?