Keeping a healthy cashflow is a must for any successful business but often this can be difficult, especially when money is tied up in unpaid invoices. Unfortunately, one of the most important areas of a business is often something that can be outside of the owner’s control – a reliance on customers to be prompt with their payment. This is why invoice finance can be so important. It is a quick and very efficient process that enables you to immediately access money that is owed meaning you maintain a healthy bank balance and can meet all your cash demands.
How does it work?
A lender will use the unpaid invoice as the security for funding. As soon as an invoice is raised a lender will receive a copy. Upon receipt, the lender will release relevant funding and will deduct a fee when the actual payment is paid by the customer. Typically, money is made available within 24 hours of the invoice being approved.
What are the key benefits?
- Cashflow – utilising invoice finance means a business can maintain a positive cashflow. Receiving immediate payment for an invoice enables the business to continue to operate successfully and further invest in their business through the acquisition of new equipment, fulfilment of growth plans or investment in new property.
- Capital – as the business grows and you continue to utilise invoice finance, your line of credit will improve due to the increase in money being passed through the business. This will have a positive impact on the level of capital available.
- Fewer Limitations – as we have already mentioned a key benefit is the freeing up of cashflow with immediate access to money owed, another major positive is that there are very few limitations with invoice finance as opposed to other forms of lenders.
- Less Risk – most forms of lending are secured with the guarantee of business assets, however, typically invoice finance requires no such risk. It is the invoice which is being used as the security making it ideal for a business that has limited assets or that wants to protect their assets.
- Flexibility – there are a couple of options available with invoice finance depending on the business’ specific needs. For example, an invoice factoring solution means the entire process is handled directly by the lender, they will follow-up on the invoices and take care of all payments meaning the business does not have to worry about any part of the process.
In summary invoice finance is an incredibly beneficial funding tool for all business types. It offers less risk to business assets, reduces the impact of late payments and helps to eliminate bad debts.
Finally, another major positive with invoice finance is the ability to purchase equipment from an oversees supplier. Finance can be immediately sent to the manufacturer and money can be collected at a later stage. This means that new machinery can be sourced immediately with no payment delays. Here at NGI, we have recently facilitated the purchase of machinery directly from China using the provision of Invoice Finance.
If you have any questions or would like to discuss any aspect of invoice finance, please call us on 01993 706403 or e-mail enquiries@ngifinance.co.uk.