Accounts Receivable Finance for your business growth

Accounts Receivable Finance is an effective way to mitigate customer risks including upfront costs and helps SMEs transition into a competitive stance in the marketplace.

Factoring includes an asset-based lending process ensuring a complete financial service integrating efficient and immediate cash flow management especially in the case of outstanding invoices, a common disruption for businesses.

Research shows that one of the greatest perceived obstacles for SMEs to initiate growth is working capital. By adopting invoice factoring companies, SMEs are able to obtain better cash management through more efficient monitoring of receivables.

Invoice factoring relieves any cause of concerns regarding the recovery of sums due and the management of credit customers. The outcome of invoice factoring is that it enables SMEs to have the majority of the value of their outstanding invoices advanced immediately. The process is typically used by businesses that have lengthy payment cycles with its customers and according to the Asset Based Finance Association (ABFA), the invoice factoring industry saw a 38% rise in businesses in 2017 using factoring and stated that asset-based lending is increasingly portraying itself as a mainstream finance option.

What is the process of Invoice Factoring?

The process is straightforward, providing that your business meets the eligibility requirements, you invoice your customer and release up to 90% of the approved invoice immediately, advanced by the finance provider, with the remaining 10% paid once your customer settles the remaining balance. This provides your business with immediate working capital, allowing you to invest time into focusing on core business activities.

Once you have provided products or services to your B2B or B2G customer, you issue an invoice for them to pay you. To qualify for small business invoice factoring, these invoices must be payable within 90 days.  Prior to being able to receive factoring financing, you will need to find invoice factoring companies you want to work with and then go through the application process.

The factoring company will determine if you meet the eligibility criteria to receive financing and conduct due diligence on the customers you’re invoicing to see if they are good credit risks. If the factor decides to approve your business based on that research, you and the factor will sign a financing agreement. The agreement will set an initial maximum dollar amount that you can borrow, which is the maximum factored amount outstanding at any given time.  Once you have a factoring relationship established with a factor, you will sell them all of your outstanding invoices. When you submit an invoice, the factor will review the invoice for eligibility and issue the advance.  

After submitting your invoices, the factor gives you an initial advance based on the agreed-upon advance rate. The advance rate is generally around 90% of the value of the factored invoice. The amount of your advance depends on the size of your transaction, your industry, and other risk parameters.  At this point, the factor may also send out a “notice of assignment” to the clients you have chosen to factor, or they may ask you to do so. The notice of assignment states that your company has assigned the factor as the entity to receive future payments for invoices you issue them.

Why Accounts Receivable Finance is a preferred funding choice amongst SME’s

Since cash flow is one of the biggest drivers of running a business, financial managers, entrepreneurs and those in command need to ensure smooth cash flow for healthy business operations. Gone are the days when businesses would solely depend on banks and other traditional lenders for arranging business capital. Today, entrepreneurs seek to acquire quick funding from invoice factoring companies that can offer a more suitable lending solution. The flexibility terms within a factoring facility are attractive to businesses as opposed to resorting to bank loans.

There are numerous examples in the U.K corporate sector where slow-paying customers disrupt the fundamental operations of a business, including their employees, reputation, market share, marketing, equity, and brand value due to a failure in sustaining an effective cash flow cycle. This solidifies that a lack of smooth working capital can incur internal damage to your business success, therefore an implementation of a healthy cash flow status is crucial.

Sell Invoices with Populous World

Populous World is a factoring facility that innovatively contributes to the £3 trillion invoice factoring marketplace for many significant reasons. One of the niche advantages of Populous World is that the platform combines blockchain technology, XBRL data, and the Altman Z-score (to determine credit ratings) to create an auction platform.

With the technology backed platform, global investors are able to participate in the auction of invoices, the advantage of this being cross border payments can be taken within seconds, allowing the invoice sellers to receive their cash instantly. This effective funding formula provides substantial short term funding solutions to increase business activities, allowing SMEs to receive more cash flow upfront, at a lower discounted rate.

Populous World facilitates SMEs to execute the value of their invoices to their customers advanced, putting cash flow worries at ease and empowers important cash flow management. The rise of invoice finance to SMEs is displayed in its progressively growing acclaim. Members of ABFA18 reported that funding levels have increased and findings demonstrate that an increasing number of SMEs are now more aware of the benefits of selling receivables and how it can favorably impact on the business’ financial credibility and profile to lenders and financial institutions. Considering this, Populous World understatedly pave a new way to invoice factoring.

Invoice Factoring can help your business meet its objectives

Every entrepreneur or company director wants the same outcome, to achieve business longevity and see all implemented objectives turn into fruition. If one of your company’s objectives is to undertake a successful period of rapid growth, invoice financing is most likely to be the best cash flow solution. Funds can be quickly obtained in as little as 24 hours, without the costs and hassle of chasing payment (the need for working capital being maximum priority), allowing you to focus on business growth and improving cash flow.

Invoice factoring is a great cash management tool for SME’s. As your high season ends, you may have made a lot of sales, but you likely have not collected on all of them yet. However, your business still has bills to pay while you wait to get paid. Invoice factoring can tide you over during that time, allowing you to focus on meeting your objectives and pave the way into company expansion.

How to get started…

For any business, whether new or established, there is always a challenge of not having enough working capital to sustain and grow, particularly if new customers have agreed long payment cycles that can take as long as 60-90 days to pay.

At Populous World, we fully support businesses of all sizes and industries to financially propel to a position where they can focus on expansion, innovation and hiring the right digital skills needed, without having to worry about cash flow shortfalls.

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