As we’re getting ready to round up 2019, many of us will be reflecting on the last 12 months and establishing our New Year’s resolutions.
As 2020 dawns, there will be the usual promises to ourselves to go to the gym, to drink less, to quit some bad habits and take up good ones – but many will be looking to make even bigger changes.
Time off, or a slow down in work over Christmas, often gives us time to take stock and think how we want our future to look. This pause for reflection could explain why 10% more budding entrepreneurs start a new business in January than any other time, according to domain registrar 123reg.
If you’ve been dreaming of ditching your employee status and starting out on your own, either as a sole-trader or as part of a team, the New Year is a time for fresh starts and new opportunities for many. Starting your own business can be a truly rewarding experience that will transform the way you live, work and earn, but with some frightening statistics about startup failure rates, it’s little wonder that even the most confident of entrepreneurs might be a little hesitant.
Decrease in startups
Recent reports have shown that there’s been a 12.9% decrease in the number of startups emerging in the UK. Much of the reason behind this slow down in enterprise births has been a lack of access to funding amid economic uncertainty.
During times of uncertainty, banks clamp down on credit and will be expecting young enterprises to prove very strong markets and needs for their products and services before they will cough up any capital.
This doesn’t mean it’s a bad time to start your new business, it simply means you need to be smart, get your ducks in a row and know exactly where your money will be coming from so you can keep afloat, remain agile and keep that cash flowing freely.
How to access funding when traditional avenues are limited
If you are finding it challenging to access borrowing to start your new business, and waiting in excess of 30 days for your clients to pay you feels like an eternity, invoice finance for startups may be just the solution you are looking for.
Unlike traditional lending, you don’t need to prove a lengthy trading history or credit background to access invoice finance. Whether you have only a few or initially just one large customer, invoice finance could be the answer to giving your budding business the fertile, cash-rich environment it needs to bloom.
Barriers to traditional lending need not apply with invoice finance
Whether you’ve been denied credit, or have a less-than-perfect business or personal credit history, invoice finance is still an option that can be available to you, providing you meet the necessary criteria.
The main criterion is that you must provide products or services and subsequently raise invoices to other businesses on credit terms Ideally, you should also expect to see a first-year turnover of at least £50,000.
How invoice finance can work for you in reality
The benefits of invoice factoring or discounting are multifold and which form of invoice finance is right for your business depends on the kind of credit control facilities you already have in place and whether you want to outsource this process or keep it inhouse. Generally, unless you have a robust, well-established credit control process, the best solution for you will be to use an invoice factoring service. This is a full-service sales ledger solution that can free up time previously spent chasing invoices, as well as giving you immediate access to working capital.
As a startup, finding a factor could provide the following benefits for your new business in its infancy and well beyond:
Effective, experienced credit control services and advice
Building relationships and understanding what makes for effective credit control procedures is our bread and butter at Partnership Invoice Finance. As factors, we have as much of a vested interest in ensuring your sales ledger is managed smoothly as you do.
Time to make money instead of chase money
We blogged a while back about opportunity cost, and how though it may seem counterintuitive to pay out for a service you could technically do yourself, the time you don’t have to spend chasing money can be spent on your core business and doing what you do best (hopefully) – making money.
Working capital freed up early
If you aren’t waiting 30+ days for payment on your invoices, but have that cash freed up immediately, you can be using it immediately. Whether you need it to pay your own creditors, fulfil orders or innovate new products or make business improvements, you will be enhancing productivity and profitability if you can remain agile.
Avoid accumulating debt you may not need (or running short of funding when required)
Even when small businesses are able to obtain traditional credit, they are often forced to accept less-than-favourable interest rates or borrowing restrictions. In contrast, invoice finance is a short-term revolving facility directly linked to your top-line sales growth. The debt is cleared a soon as the invoice is paid and new borrowing headroom created as invoices are raised, with the funding costs based on the cash you use.
Buy time to build trading history
If you have time to build a trading history, this will enable you to achieve funding and larger cash injections from traditional lenders or investors at a later date. Invoice finance can provide you with the space you need to grow.
New year, new opportunities
If the time off over Christmas gives you the breathing space to assess your life plans and you find yourself ready to take the plunge and launch your own business venture, we would be delighted to help you make your dreams a reality in 2020.
Partnership Invoice Finance specialist in providing invoice finance services to start-ups, SMEs, and family businesses. Contact us to discuss your business objectives and how we might be able to work together to help you realise them.
