As a female-led business owner, you have no doubt encountered resistance from institutions when it comes to securing additional finance or loans. You might say, it feels as if you’re still trapped in the 1950s when you’re trying to secure finance, but invoice finance is the way to take back the power and finance your business growth.
What is invoice finance?
Invoice finance is a funding solution that businesses use to unlock cash tied up in outstanding invoices. By leveraging funds against unpaid invoices, businesses can access the full value of their accounts receivable without waiting weeks or months for customers to pay. This can provide much-needed liquidity and give companies the boost they need to keep operations running.
Invoice finance can be a great alternative to traditional business loans, as it releases funds much faster and often with more flexible terms. For businesses struggling to manage cash flow, invoice finance can be the lifeline they need. It is also an excellent way for growing companies to access additional capital without taking on excessive debt.
Invoice finance works by allowing businesses to sell their invoices to a finance company at a discounted rate. The finance company pays an agreed-upon percentage of the invoice value upfront and then collects payment from the customer when the invoice is due. For businesses looking for capital to manage cash flow and fund growth, invoice finance can be the perfect solution. It is fast, manageable, and helps businesses access funds quickly without taking on unnecessary debt.
Why is invoice finance such a powerful tool for growth?
Invoice finance gives businesses the power to grow with greater access to capital. This means that businesses are no longer restricted by traditional bank financing or slow-paying clients. Instead, they can take advantage of their receivables to finance growth and seize new opportunities. With Invoice Finance, businesses instantly have access to a pool of working capital – giving them the freedom to take on large contracts, expand into new markets or simply cover everyday operational expenses.
In addition, Invoice finance helps provide greater financial predictability and peace of mind, removing the worry and stress of cash flow management. Businesses are able to act quickly on opportunities that arise, and capitalise more efficiently on new investments, driving business performance, profits and ultimately growth.
How does invoice finance work?
Invoice finance is essentially a way for businesses to access the money they are due from customers without having to wait up to 90 days before being paid in full. It works by providing businesses with a cash advance against their outstanding invoices, enabling them to get the payment they’re due as soon as the invoice has been raised.
An Invoice Finance Cost Example:
For the purpose of this simple example, we will assume that you are factoring an invoice of £10,000. Typically, a funder may be providing you with between 80% – 90% of the value of your invoice, so for this example, we will use the value of 80% which means that you could access £8,000 (less initial service fee) straight away before your invoice is paid.
Once your client has then paid the invoice, other costs will be deducted before you receive the final amount owed from your invoice. These further associated costs are generally the discount fee which will be charged on the sum advanced and how long it was outstanding and works in the same way as, for example, interest due on an overdraft facility.
So, for the purposes of this simple example let’s say your service fee was 1% and your discount fee was 3% above base (4% at the time of writing). Let’s also assume you took £5,000 of the available funds and the invoice was settled 30 days later, then your costs would look something like this:
Less service fee 1% £100.
Revised value £9,900 funded at 80% = £7,920 available to take.
£5,000 advanced (£2,920 still available if needed) and repaid in 30 days as the whole £10,000 is received.
£5000 X 7%/365 (to get daily rate) X30 days = £28.77
The total cost to factor a £10,000 invoice and utilise £5,000 of this, is the service fee plus the discount charge = £128.77. Therefore, you would have received back £9871.23 of the value of your £10,000 invoice.
There may be other charges that apply such as CHAPS fees or unpaid fees, renewal, or arrangement fees but again this is dependent on each invoice finance company. Ultimately, the cost of invoice finance will depend on a number of variables. However, by understanding the different charges involved and shopping around for the best service, prepayment, and fees, it is possible to find an invoice financing solution that suits both your needs and your budget.
Invoice Finance – Flexibility when you need it.
Some providers will allow you to decide which invoices you want to factor, if you don’t need it, you don’t have to use it. When you do decide to factor, as soon as you raise an invoice for goods or services supplied, it can be funded, so no waiting around for debtors to pay up. Quick and easy access to funding.
Expertly managed outsourced credit control with invoice finance.
When you also outsource credit control with invoice finance, you don’t just save time – you get paid faster too. By outsourcing repetitive but important tasks such as debt chasing, you’re able to focus your attention on other aspects of your business. You will no longer have to worry about if and when customers are going to pay – instead, your invoice finance provider will take care of collecting any overdue invoices. This increases predictability in cash flow, allowing you to plan ahead with confidence and make sure the business has enough money each month. Ultimately, giving you peace of mind that not only do you get paid faster but also stay ahead of cash flow.
Invoice finance: providing an innovative solution which empowers businesses to achieve their goals.
In a world where business owners of any gender should be able to access the funding they need; the reality is that female-led businesses can struggle. But invoice financing provides an innovative solution which empowers them to achieve their goals. This financial route has the added advantage of not just unlocking resources for your short-term goals but also developing trust between you and your customers, helping to ensure every invoice that goes out is paid quickly and effectively.
Contact Partnership Invoice Finance for more information. With our expertise and experience, you can be sure we will find the best invoice finance solution for your business needs.