Do you know what invoice financing is and how it works?
Invoice financing is a great way to receive quick cash for your business when you need it the most. In this post, we will discuss everything that you need to know about invoice financing. Read on.
As a small business, when you sell goods or services to customers like retailers or wholesalers, you generally produce products and services with your own money and more or less “lend” them to your customers. By this, we mean that for those goods or services, the customers don’t have to pay immediately. An invoice is sent to the purchasing company that shows the total amount due along with the date by which the invoice has to be settled. Here’s the thing. When you offer credit to your clients, your funds get tied up, that you might otherwise use to grow your business or invest in your company operations. This is where invoice financing can help you.
With invoice financing, you can meet short-term liquidity or finance slow-paying accounts receivables. Invoice financing is a kind of short-term borrowing against your own invoices and prodced goods/services which, based on unpaid invoices, is extended by a lender to his/her business customers. In order to improve your company’s working capital, your company sells its accounts receivables(= a nice term for invoices you receive payments for, accounts payables are invoices you pay) through invoice factoring. This provides your business with immediate funds that you can use for paying company expenses.
Steps for invoice financing
Through BETALD platform, the process of financing your invoice is simple and easy:
Step 1: As a small business, you provide goods or services to your customers and send them the invoice
Step 2: You sync your online accounting system to our BETALD platform
Step 3: When it is synced BETALD’s platform enable the auction after it has been approved.
Step 4: Upon approval the invoice is auctioned and it will receive bids on it.
Step 5: Once the bidsare accepted, a percentage of the face value of the invoice is paid to you by the system
Step 6: When the invoice is due to be paid the debtor (payer of the goods/services) pays the invoice to BETALD
Step 7: Once your debtor pays, the remaining amount of the invoice is paid to you minus a fee for the invoice investors costs.
Advantages of invoice finance
The major advantages of invoice finance include:
- Cash in your hands in as less as 24 hours, which usually is usually within 10 minutes from finalised auction and ca 1,5 hour from approval of the invoice
- Flexible terms
- You get to be in control since you can set the max cost you accept when the invoice is being auctioned
- Continuous cash flow without any debtnad you can borrow money in addition to the financing since invoice financing does not load your credit scores.
- Reduced risk of late payment
- You don’t need strong financials
- Professional management of receivables
- Less stress
- Increased profits
Things to consider
If you are to opt for invoice finance, there are certain things that you need to consider such as the different types of invoice finance options. Choose the one that suits your business perfectly. For example, you may want to finance only some of your invoices or you may want to finance all your invoices and access more money. The choice is yours.
Another consideration that you need to make is credit control. There are some invoice finance providers who would like to manage credit control themselves.
These things change depending on the different kinds of invoice finance options. This is why you need to make sure which type of invoice finance you want and what benefits each of them offers.
Now that you know all about invoice financing, it’s time that you go for it. Need help? Sign up today or message us!
About the Author: Per Frennbro is the CEO of BETALD, which offers high speed, low cost invoice financing for small businesses. As a serial entrepreneur, Per focuses on helping both small and medium sized businesses take control of their cash flow. Visit https://www.betald.com and see how you can turn your invoices into working capital to help your business prosper.