If you have ever Google-searched ‘how can I grow my business quickly’ or ‘fast business growth’ then this may be a post for you. We are going to talk about how having an invoice finance facility can propel your business into a bigger and better future.
Invoice finance – a brief overview
Before we explain all the ways in which invoice finance can help your business grow, it might be best to explain what it is if it is not something you have come across. Invoice finance is the umbrella term for a form of borrowing against unpaid invoices – under the umbrella you have options including factoring, invoice discounting, CHOCCS and selective invoice finance.
What does the process look like?
A step-by-step guide to the process of raising invoices from a lender:
Send your invoices
Firstly, you send your invoice to your customer, and another copy to your chosen lender.
Receive up to 90% of the invoice value
Depending on the terms agreed, you will receive up to 90% of the invoice value on the same day as when you issued the invoice.
Your customer pays their invoice
Your customer pays their invoice within the agreed terms.
You receive the remaining 10%
Once your customer has paid their invoice, you will receive the remaining 10% of the invoice value, minus the lender’s fee.
So – now you know what invoice finance is, how could it help speed up the growth of your business?
Cash isn’t king – cash flow is
You have probably heard the saying that ‘cash is king’ – but what if that cash is tied up in invoices that you are waiting for customers to pay? If you had received the money owed to you on Day 1 after providing your product or service, you could be taking on more work and have the immediate ability to purchase more supplies or hire more staff. Instead of having to wait the usual 30, 60 or 90+ days to receive cash, having an invoice finance facility means you receive up to 90% of the invoice on the day it is sent to your chosen lender. Your potential for faster growth is unlocked by having that cash ready to move forward.
Negotiate better deals with suppliers
In the same way you want your debtors to pay you quickly, the suppliers you work with also want their payments in a timely manner. By having an invoice finance facility, you can arrange to pay your suppliers quickly – the potential is then there to negotiate a better price for your supplies as you will be a more favourable customer. Having that more cost-efficient deal either means you can buy more stock than you would normally be able to and grow by selling more, or you can enjoy the chunkier profit margin.
Have more flexibility within your business
When you raise an invoice with your chosen lender, it is not compulsory to withdraw the full funding limit amount – you can pick and choose how much you withdraw depending on your business needs. As long as you raise the minimum amount of invoices as detailed within your contract, it is completely up to you how much you access each month. This is much easier compared to an overdraft where you may need to chop and change the withdrawal limit depending on how your business is functioning. Having this flexibility means you can spend less time thinking about whether you are within your funding limits and more time on growing your business.
Reduce time spent chasing debtors
When it comes to choosing a type of invoice finance facility, you must consider whether you want to handle credit control or pass this responsibility to your chosen lender. If your lender can chase your debtors for you, this means your focus can be elsewhere on your business. Having one less thing to worry about means you can spend more time and energy on the aspects of your business you want to grow.
Protect your business with Bad Debt Protection
When you sign up for your invoice finance facility, you can choose whether to include bad debt protection, a small fee which insures your invoice. Having this insurance covers your invoices should anything happen, which would leave your debtors unable to pay. This worry or fear about not receiving payment from your invoices can disappear and you can get back to focussing on growing your business.
What to do next…
If you think an invoice facility may be the right choice for your business, get in touch with us here at Contact Business Finance. We put you in contact with the most suitable lenders, depending on what you and your business needs. We are a free-of-cost service and will get to know you and your company to find the right solution that works for you.
Get in touch with Contact Business Finance today to learn more about the benefits of invoice finance solutions for your business.