For many start ups, finding that all important funding can be difficult. The banks will be looking for a proven track record which is obviously hard to provide if your business hasn’t been established long or if you rely on a couple of large accounts for most of your income. You might not have the expertise within the business to create a well oiled credit and invoicing system, and this is something that banks can be wary of. However, invoice finance and factoring are becoming much more popular options for a range of businesses – including start ups.
Invoice finance services are suitable for start ups for a number of reasons. Not only do factoring lenders not require the long track record that the banks will be looking for, but their services can also grow alongside your business. Even from day one, they can help you to manage cash flow effectively.
Factoring is the service that is often most suitable for start ups. You can unlock up to 90% of the value of an invoice and receive the funds within 24 hours, helping to free up cash flow when money is tight. The remaining 10% is released when the customer has paid the balance, minus a small lending fee.
Another attractive element of factoring is that the lender will take over all credit collection duties with customers. This will always be conducted in a professional and sensitive way, and can really help to alleviate some of the strains of invoicing from your business. Start ups often haven’t got a dedicated finance department or a sturdy infrastructure so invoicing procedures can sometimes become lost in the mix. The factoring lender can take over this responsibility so you can get on with the important job of driving sales and growing your business.
With around 50% of start up businesses looking for funding then invoice factoring could be the lifeline you’re looking for – small business finance doesn’t just stop with the banks.