Unlike large corporations that have huge budgets, small to medium businesses are often strapped for cash, often due to outstanding payments. They find it challenging, even to carry out regular day-to-day operations. During such instances, business owners often consider business loans to bail them out.
However, this ain’t the smartest approach. The lengthy sanction process, complex processing, and endless documentation mean that finding the right business loan that works for you at the right time is indeed a mammoth task.
This is where invoice financing comes into the picture.
What is Invoice Financing?
Also, known as invoice discounting, this service lets you borrow against outstanding receivables. Instead, of letting your invoices gather dust, you can show these invoices to the lender and receive advance payments for the same. You can then use the money borrowed to expand your inventory or carry out other regular business operations. You then repay the amount, along with a small fee within a stipulated time period.
Invoice financing is like an on-demand cash advance that lets you borrow against unpaid invoices.
Differences between Invoice Financing and Invoice Factoring
Very often, invoice financing is mistaken for invoice factoring, but the two are miles apart. In invoice factoring, small to medium businesses end up selling their uncollected invoices to a third-party for a hefty discount. To add to the complexity, in invoice factoring your customers end up paying the bill amount to the third-party and not to you. This strains future relationships between you and your customer.
On the other hand, invoice financing helps businesses avail a credit line for unpaid invoices, without impacting relationships with customers.
Benefits of Invoice Discounting
● Improves Cash Flow for Regular Operating Expenses
Very often, small businesses find it difficult to pay bills each month, as they have plenty of outstanding. Instead, of running helter-skelter trying to put together the necessary funds to meet daily requirements, business owners and entrepreneurs can breathe a sigh of relief, knowing that funds are just a click away.
This helps to improve the cash flow for your business, thereby helping you carry out regular operations without affecting the workflow.
● Gives you the Support to Expand
Apart from providing businesses with funds to meet regular operating expenses, invoice discounting gives you the financial padding to help you develop new products, launch additional services, try out other marketing strategies, purchase new equipment, upgrade your infrastructure, invest in new technology, or open new locations.
● Simple and Quick Processing
Unlike regular business loans, invoice discounting doesn’t require complicated documentation. Also, you don’t have to submit collateral for borrowing, thereby simplifying the entire process.
How does Invoice Financing Work?
● You provide your client with a service or supply them with products. Once you raise the invoice to a client, you share it with a digital lender like Indifi
● The lender provides you funds close to the invoice amount immediately.
● Use the funds to meet your regular operating expenses or use it to further develop your business.
● Repay the lender, when your customer pays you.
A Fab Funding Option
Invoice discounting is an excellent alternative to time-consuming and cumbersome business loans. Instead, of letting your cash getting locked up due to outstanding invoices, you can put your money to work with the help of invoice financing. Whether you’re looking to keep up with seasonal demand, improve cash flow, handle payments or expand your business, invoice discounting comes to your rescue.