How ‘accounts receivable financing’ can strengthen your business

At first glance, ‘accounts receivable financing’ sounds like an intimidating topic. While it can be complex for people unfamiliar with the subject, it boils down to a simple fact that businesses may often come across a situation where they require additional cash or working capital than they have at hand, to cover anticipated revenue shortfalls.

This type of financing is also typically referred to as ‘invoice financing’, a type of financing solution in which a company uses its receivables — the money owed by its customers — as collateral in a financing contract. Although ‘accounts receivables finance’ encompasses both invoice discounting and factoring, the term is sometimes used to refer to both types of plans collectively.

Why ‘accounts receivable financing’ is becoming 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 or working capital for healthy business operations. Gone are the days when businesses would solely depend on banks and other traditional lenders for arranging business capital. Nowadays, entrepreneurs seek to acquire quick funding from alternative financing companies to offer a more suitable lending solution. The flexibility terms within an invoice financing company pose a main factor for why businesses today prefer this form of funding 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.

Invoice financing 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 financing 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 financing can tide you over during that time, allowing you to focus on meeting your objectives and pave the way into company expansion.

Lou Chan, Populous World

For more information on invoice financing for your business, visit us or speak to a member of our expert funding specialists: