Invoice finance is a mechanism for businesses to raise funding without taking on additional debt. When you receive an invoice from a supplier and you don’t have the funds available to pay it immediately, an invoice company can give you an advance on that invoice so that you can pay your suppliers. They will then collect their money later from the customer who owes the original amount. There are many benefits of using invoice finance services but they are not always the right choice for every business. Here are five scenarios in which this type of funding can be very useful:
Rapid business growth
If your business is growing rapidly, invoice finance can be an ideal choice. This is because it provides a quick and easy way to access funds that are urgently needed by businesses that are experiencing rapid growth.
One of the most important reasons why many companies choose to use invoice finance is because it enables them to grow their business by investing in new areas or hiring more staff.
Seasonal ups and downs
When you run a business, you’re always at the mercy of your customers. They can pay their invoices late or not at all, which can put pressure on your cash flow and leave you scrambling for money when it’s needed most.
This is especially true when businesses experience seasonal ups and downs–as many do, particularly those that rely on tourism or holiday sales. If there isn’t enough revenue coming in during these times, financing may be able to help cover the gap until more customers start paying their bills again.
Urgent funding required
If you are in need of urgent funding, invoice finance can be an ideal solution. As a short-term working capital solution, it is more flexible than bank overdrafts and offers greater control over the amounts that are borrowed.
Invoices are the lifeblood of most businesses, but they can also be a financial burden. If you need to borrow money but your current credit rating is too low for traditional funding sources to accept you, invoice finance may be the solution you’ve been searching for.
No trading history
When you’re starting out as a company, it can be difficult to get trading history. You may have been trading for a while but the business was under another name or was sold, so there is no information about your past performance. This makes it hard for lenders to assess whether they can trust you and whether you are likely to pay them back on time.
Invoicing is different from other forms of financing because it involves selling goods before they are produced; therefore, invoice finance providers cannot see exactly what will be produced or when – only that there will be some production in future months based on previous sales figures. This means that if your business has not yet reached maturity (for example if it has only been trading for two years), then lenders will be wary about lending money on the basis of future earnings alone without any proof that those earnings will come through in full each month as expected
Wages and expenses
invoice finance is a good option for companies with high wages and expenses. If you’re running a business that has an expensive workforce, such as a law firm or medical practice, invoice finance can help you fund your business even if you don’t have trading history.
This type of funding works well for small businesses with seasonal spikes in their sales because it allows them to take advantage of those peaks without having to pay back any interest or fees until after the sale has been made.
Conclusion
If you’re looking for a flexible financing solution with low interest rates and minimal hassle, then invoice finance may be the right choice for your business. In this article we have outlined five scenarios in which invoice finance could be ideal: rapid business growth, seasonal ups and downs, urgent funding required, no trading history or wages and expenses.