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Invoice Financing - an Immediate Solution to Overcome Your Business' Cash Crunch

Maintaining a good cash flow position is essential for the survival and growth of any business but it is especially critical for small business enterprises and start-ups to maintain healthy cash flow. Apart from paying their suppliers, employees and meeting operating expenses, these commercial establishments need to invest back into the business. Most small businesses and start-ups do not have the luxury of having a robust saving account or a line of credit to do so.


Invoice financing or debtor financing helps your small business establishment or start-up to stabilize its cash flow position. Under this financing method, you can convert your outstanding business invoices for thirty, sixty and ninety day's payment period into immediate working capital. This financing option is ideal for business-to-business (B2B) commercial establishments that need assistance in managing their cash flow because of slow paying customers. With invoice financing, you can conveniently turn your outstanding accounts receivable-money that your customers owe your business but yet unpaid- into immediate cash. Technically, invoice financing or debtor financing is not a loan. Rather, as a proprietor, you are selling your outstanding invoices at discount to invoice financing company for immediate cash. This allows your business or start-up support seasonal demands or cover temporary cash shortages when your customer invoices are past due.


Normally, an invoice financing company will advance business enterprises eighty-five percent of the value of customers' past due invoices. As soon as the customers clear their outstanding dues, the finance company will pay the business enterprises the remaining fifteen percent of invoice value. In exchange, the financier will charge you a certain percent for lending the amount and as administration expenses incurred by the finance company. The cash is essential in keeping business enterprises functioning during a cash crunch by allowing them to meet expenses like payroll or payments to suppliers.


Business enterprises can avail of the following advantages from invoice financing:


  • Easier Application Process
    Nowadays, banks and financial institutions are enforcing stricter lending standards. This is the reason why many small business and start-up find themselves at a disadvantage with traditional banking loans. However, in invoice financing, the financier is only interested in the ability of your customers to pay their dues to you. The finance company will not run the risk of running a credit check of your business organisation. This is important for small business enterprises and start-ups that do not have a significant business credit.

  • Faster Cash Supply
    Invoice financing is a faster and more efficient means of obtaining immediate cash for your business. This enables proprietors of these business enterprises and start-ups to invest money back into their businesses. Apart from this, this cash influx allows such business owners to secure more job opportunities and take advantage of larger discounts offered by suppliers. They can also buy the necessary equipment to enhance long-term production.

  • Collection Assistance
    As a proprietor, you may find yourself at a disadvantage and struggling with outstanding invoices that you are unable to enforce. In a number of cases, the invoice financing companies act as collecting agents because they collect the debts of your non-paying clients. This helps to focus on the growth of your business.

- ABR Finance Pty Ltd @Medium