How Invoice Finance Can Help Your Business

Carl Faulds

If you have a business enjoying steady but slow growth, you’ll probably think all your Christmases and birthdays have come at once when you win a huge new client whose orders could take you to the next level. However, there’s a sting in the tail: it’s precisely at this moment of transformation and accelerated growth that your business is most vulnerable – and most likely to fold.

Why? Simply because you’ll have to invest in new stock and potentially new people and new equipment to meet the customer’s needs – and you’ll have to pay for all these expenses before you get paid, placing enormous stress on your cash flow.

Invoice financing can be the answer.

Introducing factoring and invoice discounting

Factoring and invoice discounting allow you to borrow against your invoices, the instant you issue them. Most factoring companies will allow you to borrow around 85% of your invoices’ value, with repayment made when your customer pays you. With factoring, the finance company assigns experienced credit-control professionals to secure early payment, thus reducing the amount of interest you pay. With invoice discounting, you retain control of your own debtor ledger.

There are advantages and disadvantages to both approaches. Opt for factoring, and you don’t need to devote your staff’s valuable time to chasing up payments; however, your customers may prefer dealing with you than with a third party. It’s a fine balance, and your decision will rest on the strength of your customer relationship and the capacity of your accounts team. But let’s consider the ongoing benefits of invoice finance.

Banish cash flow blips – forever

Every business encounters a cash flow problem now and again. When you’re waiting 30, 60, or even 90 days for your customers to pay and your own creditors are pressing you for payment, you can find yourself in serious trouble even when your company is well financed and profitable. Invoice finance allows you to eliminate the hiatus between invoicing and being paid, giving you cash on hand to pay your bills.

Equally importantly, invoice finance gives you money that you can use to drive further growth, creating a virtuous circle. In particular, taking on very large clients with aggressive and inflexible payment terms becomes a lot less risky, so you can move your business up a gear without running out of road.

Invoice finance is more flexible than ever before

Traditionally, factoring and invoice discounting companies had quite complicated fee structures and lengthy terms of business. Many specified minimum volumes of business that were sufficiently high to exclude small, growing companies. However, new online invoice financiers are much more customer-friendly, using cutting-edge technology to drive down costs and minimize turnaround times. In fact, they have succeeded in transforming factoring and invoice discounting into a fast, flexible, and affordable way to banish the cash flow blues – and make taking on major new customers a happy occasion rather than a headache.

For more on how fintech can benefit your company, see Using Digital Tools To Enhance Financial Agility.


About Carl Faulds

Carl is a business recovery specialist. He started work in the Business Recovery profession in 1990 and has continued to pursue an ethos of working with distressed businesses to help them overcome their financial problems. As Managing Director of Cashsolv, he offers advice and support to overcome cash flow problems and identify possible underlying problems that can be addressed to ensure a positive future for your business. Carl was former president of the Insolvency Practitioners Association, and makes regular appearances on BBC documentaries related to business recovery. Follow him on Twitter @CashSolv_Carl and @Cashsolv.