Invoice financing is the fastest and easiest way to get cash for your business. It's a simple solution for any business that needs working capital without having to jump through hoops with banks or other traditional lenders.
Invoice financing is a way to get cash now, without having to sell your receivables or your company.
Invoice financing (also known as factoring) is a financial instrument that allows you to raise money by selling invoices at less than full value. For example, if you have an outstanding $10,000 invoice and are able to sell it at 85% of its face value (i.e., $8500), then invoice financing will give you the opportunity and ability to get that money immediately from the buyer.
Invoice finance can be used for the following reasons:
· Business funding – Invoice financing can be used to fund a business expansion, or it can help you pay bills and expenses until cash flow improves.
· Startup funding – If you need to purchase equipment, inventory and/or a building before opening your doors (and have no other assets), invoice financing can provide the needed capital as soon as your first customers are paid. The money is repaid from the company's future invoices once they start coming in.
· Expansion funding – If your existing business needs additional staff or machinery, invoice financing allows you to make purchases without having to wait for new clients or investors' checks to arrive in the mail.
· Working capital – If there's no need for major capital improvements but cash flow has slowed down due to seasonal fluctuations or other factors, invoice financing allows businesses with good credit ratings last longer without having their accounts payable departments reach maximum capacity
The idea behind invoice financing is simple: a company with an outstanding invoice agrees to lend the money to another company in order to pay their outstanding invoice. The second company then pays back this loan over a specified period of time, usually with interest.
The process usually works like this: A business has an outstanding invoice they need to pay but don't have enough cash on hand or don't have access to any other form of borrowing. So they ask another party (usually a lender) for some cash in exchange for taking over their receivable (the outstanding invoice). In return for loaning them money against this receivable, the lender gets paid interest on top of its principal amount loaned.
The cost of your invoice financing loan will depend on a number of factors, including the length of the loan, your credit rating and the interest rate. Generally speaking, if you are paying back a longer-term loan (between 1 year and 12 months), then you can expect to pay higher interest rates because there is more risk involved with lending money over that period. The average rate for invoice financing varies depending on whether it's short-term or long-term funding but usually ranges between 5% and 25%.
The good news is that even if you have bad credit scores or don’t have any previous experience with loans, there are still lenders out there who are willing to offer invoices at reasonable rates. However, most reputable companies will require collateral in order to secure their loans so make sure that whatever property (or assets) you offer as security has value and won't lose its value over time.
Invoice financing is a loan secured by your unpaid invoices. The lender buys your invoice and takes on the risk of collecting payment from customers, who then pay the lender instead of you. Invoice financing is provided by a third party, not the supplier or customer. It's also not provided directly through your own business—you'll need to work with an invoice-financing company to get started.
Invoice financing is a great way for businesses to get the cash they need when they don’t have enough of it. It’s an easy process that can be completed in a matter of days, and you don’t even need collateral or credit history! If you want more information about how this could benefit your company, contact us today so we can discuss all of our options with you.