“Does your business own assets?”
Unless you bought your (work)shop or office space, own a larger machine than an espresso maker or a proud fleet of vehicles you may be tempted to answer no to your bank. No security, no cash, in many cases.
Yet your company is bouncing back from lockdown, the order book fills up, customers are queuing and invoices have been sent out. But with your current bank overdraft absorbing losses of the past and another unsecured loan not an option, the gap between profits and cash can become insurmountable: Too many suppliers, new staff, and taxes need to be paid before money rolls in.
In fact, even if a business is able to bite a large chunk off the biggest predicted economic growth since World War II it can die of thirst without sufficient liquidity.
It’s true that solid payment terms can help get cash in more quickly. It is also true that most clients will hold on to their money as long as possible.
What many SMEs forget is that their invoices represent an asset which can be turned into cash long before clients decide to pay them.
Invoice finance and invoice discounting take your debtor book as an asset. Depending on your industry, business credentials, the payment risk, volume of invoices and size of each invoice the invoice factor will work out a discount rate for your business.
How to work out whether invoice finance makes sense for you? For example, if you used invoice finance or invoice discounting at a cost of 3-4% a year and are able to create a return of 6-7% or more by using the provided funds invoice finance or discounting may be well worth it.
Who do you know is sitting on a pile of unpaid invoices while needing to ramp up their business?
https://www.cc-finance.co.uk/factoring-invoice-finance-solutions/
