As the world continues to recover from the pitfalls of the economic recession, businesses seek out ways to obtain conventional business finance and keep their debt at minimal level. This causes a huge strain on the cash flow of businesses especially those actively involved in day-to-day commercial operations.
Businesses that sell to other businesses prioritise themselves to maintain a cash flow that grows in perpetuity and this often appears to be an implausible task. Even the most solvent of businesses risk becoming untenable if they face cash flow problems. With recent innovations in commercial financing facilities such as invoice finance, companies can now rely on their outstanding debt to secure an immediate injection of funds.
Invoice Finance is a technique of borrowing money against pending sales invoices. It provides complete flexibility and allows a business to run itself without using its cash reserves. It is a very suitable facility for businesses that sell to other businesses as there is some assurance of the quality of the outstanding debt. In addition, invoice finance assists businesses of all sizes and has a specific financial package for all the industries it comes across.
In this difficult economic climate, banks are becoming increasingly reluctant to offer credit facilities to businesses. Even the most solvent of businesses could experience cash flow problems. In the interim, invoice finance permits you to secure business funding in a fluctuating market environment by providing cash advances against outstanding payments from customers. You do not have to wait 30-90 days to get paid and the end result is an instant cash boost against your sales account which allows you carry on your business stress-free.
What a feeble cash flow could mean to a business
Businesses in the UK have a culture of late and/or overdue payments which creates a giant pit in the finances of the creditor business. Customers in debt delay their payment of outstanding invoices right up to maturity date or later which leaves their cash flow in a favourable position. This causes a financial strain on the creditor business in need of funds to pay its bills and forces them into expensive forms of borrowing.
On a very local level, individuals who have money at home may not have the cash to buy a commodity in a shop which is heavily discounted. The same scenario applies to businesses that become restrained from short-term opportunities as they arise. Businesses with cash flow problems are often hindered from short-term equanimity and long-term expansion.
How Invoice Finance makes the cash flow
Invoice finance transforms outstanding invoices into cash available within 24 hours of raising an invoice. This creates higher levels of working capital and enables a business expand in a risk-free manner whilst taking advantage of accurate financial forecasting.
It is encouraging that this form of finance is growing at such an increasing rate as many businesses now can comfortably rely on invoice finance to get their cash flow back on track. With an invoice finance facility, businesses take advantage of the following:
Up to 90% of outstanding funds released almost immediately
The option to control the sales ledger and debtor collection
Increased working capital hence the ability to pay bills on time
Improved bargaining power and access to early supplier discounts
Flexible facility as its growth is dependent on your sales volume
Competitively priced facility
Fewer conditional requirements
Loan repaid each time your customer repays their invoice
Invoice Finance is best offered by a commercial finance broker who would have access to the suitable lenders that can help fuel growth in your business. Reasonable advance rates are offered and the remainder of the invoice value (less any charges) is paid to you once your customers settle their invoice.
This business advice article was provided by Touch Financial, the Factoring specialists.