As business people, we all know that an invoice is all very well, but until it becomes cash, in our hands, it is the only reminder of money to come. You can’t pay the bills with your invoices. So it’s no surprise that we’re regularly asked questions about invoice finance.
Given that, we want to now take a quick look at the features and benefits of invoice finance and for that, we need to start at the beginning. And that means exploring the term, what is invoice finance.
Invoices are great – you get a real thrill when you send out an invoice, after a job well done. Now, depending on which client it’s going to, that feeling can quickly sour.
In the ideal world, you send an invoice – maybe together with a purchase order number – and by return, your money should come sailing back by bank transfer.
In reality, it rarely works like that. And many of the big companies are the worst offenders. They will often insist on 30 days and then string you out to 45 once they’ve exhausted you with their usual excuses. Some will go as far to say their normal terms are 60, or, incredulously, 90 days. In effect, they are cash funding their own business via your goods, or services.
And okay, we all know the answer. Don’t supply them again and refuse to work with them until they can treat you properly. But, as many of the buyers know full well, that if you don’t accept the terms, then someone else will. It’s not always easy to turn down credible business with a company that could make your name and boost your product.
But, not getting paid promptly is about the worst thing that can happen to you. Cash is king don’t forget and poor cash flow is the thing that will keep you up at night. It is the oil that keeps the engine running – without it, things could soon grind to a halt.
So, what can you do to alleviate the cash-flow nightmare?
You can use invoice finance, which at its simplest level, means you exchange your invoice with a recognised specialist in the sector, for a percentage of its value, usually between 60% and 90% (depending on several factors).
This means that rather than waiting for up to 90 days, you could have most of your money within 24 hours and get paid the outstanding amount when the debtor (where the invoice was sent) pays the invoice in full.
Of course, there’s no such thing as a free lunch, so you will have to pay a fee for this and an agreed level of interest on the outstanding balance, but just image if you had your invoices paid on time, every time.
Now, that’s the basic principle and there are many variations and you need to figure out which one suits you. For example, do you want to chase the invoice, or do you want the lender to chase the invoice? In the industry terminology, the former is called invoice discounting, the latter invoice factoring.
Invoice discounting is effective if you want to keep control of your invoices and have the resources to chase them. You might feel more comfortable if your customers don’t know you are using such a service. This is especially important with long term, or sensitive customer relationships.
If you don’t mind customers knowing you are using an invoice finance service, then invoice factoring is for you. Is it the service provider who chases the client and makes sure you get paid the outstanding amount. This can free bags of time for you to focus on your business.
The long and short of it is, you get paid a large proportionate of your invoice without any delay. And that, as we all know, is a huge boost to your business and your very ability to survive.
Find An Invoice Finance Lender with Ping Finance
The process of finding and applying to suitable lenders you can trust can be lengthy. Thankfully, at Ping Finance we take the burden off your hands.
We’ll take the time to get to know you and your business’ circumstances, matching you to lenders that can offer some of the best business loan rates available. We’ll present you with a wide selection of suitable finance providers who you can apply to simultaneously, reducing the time it takes to secure a loan that’s right for you.
We have helped businesses in a diverse range of industries, including agriculture and healthcare. There’s also no charge to our services, and you’ll never feel obliged to accept the finance options we offer. Our quick, straightforward process is designed so you can access the finance you need as soon as possible.
With the money in the bank, your business will be able to flourish. Register for free with Ping Finance today.