Can Any Invoice Financing be used to Increase Cash Flow?

There are multitudes of reasons why businesses experience cash flow problems and these have become more common in the modern world where nearly all businesses use some kind of finance. Small business owners may use a credit card to ensure replace cash flow when they are waiting for an invoice to be settles, but any decent size enterprise will usually require a more expansive arrangement. Large international companies, right through to SMEs that are experiencing growth, use Invoice Financing and this is what enables them to begin or continue to operate smoothly and without interruption.

Invoice Financing – The Basics

There are many different ways to secure bridging finance. This can help circumnavigate problems that arise when a company has supplied goods or services, but the related invoice remains unsettled. Invoice financing can provide a cash injection that ensures a business can pay their staff and suppliers and keep their business running successfully. Finance is provided to the business in need up to the approximately 90% of value of their accounts receivable figures and the factor (lender) than provides the remaining percentage when the invoice is settled. The factor makes a percentage based on the loaned amount and in turn, they will contact the customer for payment. Any money recorded on a company’s sales ledger can secure finance from a factor.

Is this a New Method of Finance?

This form of bridging is useful when customers who are slow to pay are hindering expansion or affecting a company’s ability to operate. Also known as, Factoring, or Invoice Financing, the use of credit against the balance of a sales ledger has been around for a long time. In the past it was associated with companies that were experiencing difficulty, but the modern banking systems it is how much of the business world operates.

Careful Use of Finance

There are a number of things to consider when using Invoice Financing. There are different products available with different levels of risk. A business that has good customers and is established, may want to assume the risk themselves. This is when the business that uses the finance retains responsibility for the debt if the invoice is never settled.