‘Invoice purchasing’ for sustaining business growth
Invoice purchasing is a beneficial alternative to obtaining quick invoice funding to advance your cash flow and meet your evolving business needs. This method of finance uses invoices as a way for businesses to unlock cash tied up invoices and therefore speeding up cash flow. This is achieved by listing invoices to a third party (investor) for purchasing, a majority of the funds (typically up to 85%) are then advanced to the business, (the borrower) the third party then receives a percentage of the invoice.
An influx of funding improves cash flow and working capital status, which ultimately encourages a breakthrough into a positive financial stance.
Achieving positive trends on your sustainable growth curvature
Unquestionably, every business owner strives to accomplish constant business growth and aims to avoid financial barriers that can threaten growth and company expansion.
The need to be smart about managing cash flow is currently more important than ever. Traditional finance providers have never been more reluctant to lend to SMEs, and at the same time, large corporates want to hold onto their cash for longer and are doing so by extending payment terms to their smaller suppliers.
This indicates that invoice purchasing can be a vital and effective tool to preserve cash flow management. Businesses should strengthen their cash reserves and set up credit facilities when times are good. By thinking ahead, they get more funding at cheaper rates than if they were to seek finance during more stringent times. Economic uncertainty and unexpected expenses are widespread and the perceptive, prudent businesses are the ones that gain advantageous opportunities when they can.
Moreover, businesses that fail to create the right strategic balance can suffer a financial downturn and get trapped in a poor credit situation.
Slow paying customers and vendors can hinder your business functions and de-stabilise your competitive position.
In order to manage everything properly and avoid a business standstill, SME’s need to acquire necessary capital for smooth and up to date business operations. Extensive research and studies have found that nearly 65% of all entrepreneurial ventures in the U.K, including both small and large scale initiatives fail to make an impact on their first year business operations due to ineffective cash flow management.
Invoice purchasing — the definitive lending solution for the foreseeable future?
The rise of alternative finance in the last few years is now a popular and trusted form of lending, however, awareness amongst business owners of these new funding options remains low. Peer-to-peer lending and invoice financing platforms are increasingly providing SMEs with funding solutions that use technology to offer speed, transparency and flexibility.
Invoice factoring companies typically offer their invoice purchasing services to companies with an annual turnover of at least £50,000, although some will consider start-ups and smaller businesses. A business can typically borrow up to 85% of the value of their invoices. Several different types of providers offer factoring or invoice discounting facilities, including banks, financial institutions, independent providers and online newcomers such as Populous World, which auctions invoices to global investors. The auction process provides invoice sellers with a range of competitive offers and bids around the globe from individual investors.
The Populous World auction model appeals to a multitude of SME’s as it means they can select which customer invoices they would raise finance for, and would only incur fees when they need to use it. The platform offers flexibility where you can choose to discount the invoices based on your needs.