While invoice finance can be a viable alternative to seeking a small business loan, it’s also a good short term method of plugging gaps in your cash flow if things get a bit tight. With a much shorter application process and with funds often released within 24 hours or so, factoring and invoice discounting are both flexible and versatile ways to get hold of that extra funding. So how exactly can you use invoice finance to help your business, and when should you look towards this kind of financing as a viable option?
The biggest benefit of invoice finance is that it gives you quick access to cash that you’d otherwise be kept waiting around for. It’s particularly useful when dealing with large customers that might delay paying their invoice for one reason or another. By using invoice finance, you can get access to this cash quicker during the interim period between issuing the invoice and getting payment from the customer – especially useful when you’ve got wages to pay.
But how do you know when invoice finance is the right choice for your business?
Often, invoice finance companies can specialise in certain areas of factoring such as construction or particular types of contract. Looking for a company that can help you most effectively is important when finding out about your factoring options.
You also need to consider why you need quick financing. While invoice finance can be used as a structured plan for finding extra cash flow, using it as a short term method shouldn’t favoured over addressing the source of the issue in the long term. While invoice finance can give you room to breath, if you’ve got ongoing late payment problems then you need to address these by reviewing your invoicing procedures.
Invoice finance is a good option when you need access to funds without the hassle of dealing with the banks. while relying on credit cards and overdrafts might be your first instinct, looking into alternative methods of finance can be a great help when times are tough.