Invoice finance, or Invoice Factoring, although widespread and now a popular, trusted form of lending, remains relatively unknown to SME’s. It is important that businesses of all sizes are aware of the facts about Invoice Finance and the processes involved when adopting a factoring company.
If you’re new to the method of Invoice Finance and wonder whether you are eligible to use a factoring facility, here are 5 quick facts to help you get started:
1. No long-term commitment is required
With most traditional bank loans or finance options, you might be required to commit to contracts that lock you in for up to 5 years. With short-term funding such as Invoice Finance, no long-term commitment is required and you can use the service as and when you choose to.
2. Factoring is cost-effective
Invoice Factoring consists of a small fee that is charged by your factoring provider, unlike a traditional loan that can be expensive and time-consuming. Factoring recognises that businesses require as much working capital being reinvested into the business as possible, which is why factoring grows organically as your business expands.
3. Factoring isn’t a loan
There is a common misconception that factoring is a loan. Factoring is the purchase of future receivables and advances money that you are owed from late invoices. Most factoring facilities will advance up to 90% of the invoice within 24 hours paying the balance to you after the payment from your customers has been collected. This means you will always have a positive cash flow, funds and working capital.
4. Factoring is on the rise with UK businesses
In 2018, the number of businesses using invoice finance and asset-based lending during the year remained steady at over 40,000. The number of larger SMEs (those with turnovers in excess of £10 million per annum) using invoice finance and asset-based lending increased by 13 percent compared to the same month a year ago.
5. Quick Approval
Depending on your factoring provider, the approval process is unlike a traditional bank and can take as little as 24-48 hours
>> Is your business in need of fast, short-term financing? Do you need to access cash faster than your customers pay you?
Populous World is an Invoice Finance provider that unlocks working capital for UK businesses.
Bridging your business’s cash flow gap is something that Populous World excels in delivering, providing you with the funding tools to grow and sustain your business.