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Invoice Finance: The Basics

Invoice finance is being hailed by the government as one key way for SMEs to reinvigorate their growth and expansion plans. With the UK economy in a bit of a sorry state and with GDP looking to stagnate for the rest of 2012, anything to help small businesses is welcome. This is especially true in light of the lack of bank lending for many SMEs. So, what is invoice finance, and how can it help your company?

What is invoice finance?

Invoice finance includes alternative funding methods such as factoring and invoice discounting. In essence, these services let you sell your invoices to a third party, thus helping you to unlock the capital tied up in unpaid customer debts. This gives companies quick access to funds that might otherwise not be available for months – late payment is after all a big problem for many small and medium businesses.

What can invoice finance be used for?

Most commonly, invoice factoring and discounting are used to improve the cash flow of a business. Late payment from customers can be a big problem – after all, if customers aren’t paying, what are you going to pay your bills and wages with? Invoice finance is accessible, flexible and affordable for many businesses, often much more so than bank lending options such as overdrafts and loans.

Is invoice finance right for your business?

Invoice finance is generally far more accessible than bank lending – especially with the increasingly stringent requirements that the banks are asking for in light of current economic circumstances. If your business issues invoices to customers on a 30, 60 or 90 days basis, then you could be suitable for invoice financing services.

Invoice finance is one of many alternative funding options available – it’s being chosen by more and more SMEs as a solution to their cash flow problems.

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