Invoice financing is a funding method used whenever a third party agrees to buy your unpaid invoices for a fee. Invoice financiers can be a specialist independent company, part of a bank or other financial institution.
When should you consider using Invoice Finance?
Consider how urgently your business needs working capital. If the business cannot afford to wait for the cash to be collected from your customer, selling invoices will almost certainly be a more sustainable decision.
Is your need for short-term cash ongoing or a one-off?
The key selling point of invoice finance, compared to the traditional factoring approach, is speed and flexibility. Many invoice financiers require businesses to “sell” some, or all of their sales invoices each month. At Populous World, invoice financing allows businesses to pick and choose when they use the service with the option to sell individual invoices.
If your cash flow position is low then the flexibility provided by invoice financing may help. If, however, you are looking to convert trade debtors into cash quickly on a longer-term basis, the auction process format used by invoice financing is unlikely to appeal, as it provides less certainty over the amount of cash your business will receive.
What are the costs and risks?
Invoice financing provides flexibility, but that comes at a cost. Invoice financing can be expensive. So it’s worth noting that any business requiring cash in the short term to consider as many finance options as possible to ensure it chooses the one that best meets its requirements.
For example, if the company can foresee that it’s likely to have a cash shortfall in the future, it may consider applying for an approved business bank overdraft. This would provide the required flexibility, provide certain access to cash, and maybe a cheaper alternative.
Similarly, the business may wish to consider bank loans, peer-to-peer lending, asset-based finance, leasing and hire purchase as feasible alternatives to invoice financing.
>> Is your business in need of fast, short-term financing? Do you need to access cash faster than your customers pay you?<<
To explore these benefits further, why not call Populous World and discuss how invoice finance could improve your working capital. Populous World provides confidential invoice discounting for small to medium-sized businesses.
>> 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.