When your small to mid-sized business needs to increase cash flow, there are very few finance options that can provide as much flexibility and speed as using invoice finance.

Invoice finance can be a way to gain access to working capital almost instantly. By releasing the capital tied up in your business’ receivables.  This type of funding means the finance company will take on the burden of waiting for payment on your invoices, providing you with a cash advance that can be combined with outsourced credit control services and bad debt protection.

There are many reasons why a business would need instant access to working capital, and why your business would consider using alternative finance over a traditional lender. Here we outline our thoughts as to the key benefits of using invoice finance over applying for a traditional bank loan.

1)           Sales on Credit Behave Like Cash Sales

When you use invoice finance, you are using an asset you have already created – your sales invoices. Invoice finance can allow you to access cash earlier than you would if you waited for your clients to pay, no matter how good the payment terms are that you have negotiated. Imagine a world where you are being paid within 48 hours for every sale you make or service you deliver – who knows what kind of opportunities you could take advantage of, or risks you could avoid, with that kind of agility.

2)           Fast and Personal Service

It’s no secret that banks can take an age to make a lending decision. Often, this is time you don’t have if you need cash to fulfil an order or seize an opportunity – time waits for no bank manager. An invoice finance arrangement can be turned around surprisingly quickly, despite being personalised to your needs. It’s often possible for an arrangement to be reached quickly, often within a day or two, with the funds released as invoices are raised.

3)           Lower Personal Risk

Banks often ask for collateral, and when a business is young and doesn’t have enough assets of its own this can include personal assets from the directors. Invoice finance releases the working capital tied up in your invoices and is therefore principally secured on this business asset, money your clients owe you – not the personal assets of the directors.

4)           Reliable Cash Flow

You are not at the mercy of your client’s payment schedules. The UK’s late payment culture is one of the biggest hurdles SMEs have to face – often responsible for stifling growth, sending thousands of otherwise successful businesses into insolvency, and causing a great deal of personal stress to company directors countrywide. With invoice finance, you know you can access the value of an invoice almost immediately, you are not beholden to your customer’s payment whims, and you can put that money to good use straight away, for example paying your suppliers on time every time rather than waiting until you have been paid – doing your own bit to end the knock-on effects of the late payment culture on the business food chain.

5)           Added Value

When you enter into a factoring arrangement, the factor takes over your entire sales ledger and credit control process, freeing up your time to make money rather than chase money.

6)           Flexibility

Invoice finance can offer so much more flexibility than traditional business loans or overdrafts. A decision to lend against your business’ invoices can be much faster, and it’s usually possible to achieve a greater level of borrowing, dependent on the size of your ledger and your circumstances. A facility that grows as you grow, linked to your top lines sales and not one that has to be constantly renegotiated.

7)           Size Doesn’t Matter

Even small, family-run businesses and startups can access invoice finance. Whereas you may be turned down for traditional credit due to a lack of trading history, invoice finance can still be available as it’s based on your current and future sales. If you offer credit terms to business clients, the chances are you can raise capital with invoice finance.

8)           Unlimited Funding Potential

Banks operate with strict control over the credit they will offer you, and when you reach your limit you must then apply again. With invoice finance, the available funding for SMEs increases as your turnover does – helping you continue your growth trajectory without having to make new credit applications. Basically, the more you bill the more cash you can access.

9)           Poor Credit History is Not a Barrier

Approval is based on the creditworthiness of your clients and how you manage your credit control procedure and the quality of the goods/services you deliver, not just the credit or trading history of your own business. We understand that even in the best of businesses there can be periods that would trouble a traditional lender, so even if you have poor or no credit history you may still be able to access funding from invoice finance.

As invoice finance and other forms of alternative finance continue to grow, we are keen for this practice to be seen as an appropriate form of borrowing for all SMEs and startups There are many reasons why accessing funding through the value of your sales ledger is a better way of maximising working capital and keeping cash flowing through your business than accumulating traditional business debt.

It isn’t just that bank lending isn’t as available as it once was. It isn’t even that funders like Partnership Invoice Finance are generally less risk-averse than banks or other traditional lenders. The main benefit of alternative finance is that there are far more flexible, convenient options available that can suit your small or family-run business’ needs better than traditional lending options.

To discuss your personal requirements, and whether we can work together to help you maximise your cash flow and your potential, contact our team of experts for a confidential discussion.