4 Reasons Why SMEs Should Consider Invoice Financing

You are happy. Your sales are rocketing. But weirdly enough, you’re running out of cash. It’s becoming hard for you to maintain a positive cash flow. What has happened? Chances are, you’ve sent invoices to your customers for all the products you’ve sold and all the projects you’ve completed. But it’s likely they aren’t paying you on time. This sets your business back because you might not have enough money to carry on. Fortunately, this problem can be aided by invoice financing, which essentially lets you release the cash that has been “locked up” in unpaid invoices. You trade your pending invoice for a quick loan so you can go back to running your business as soon as possible. Reluctant to use invoice financing? Maybe these reasons can convince you.

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Releases locked cash

This is the main reason why many Small and Medium-Sized Enterprises (SMEs) consider invoice financing. Invoice financing releases cash that has been locked in customer invoices for a long period of time. It will convert your company’s account receivables into liquid cash. The process of invoice financing is also quicker than other credit products from banks and other financial institutions, ideal for SMEs that need to start new projects immediately.

Improves your cash flow

With the money from invoice financing, your cash flow will significantly improve, since up to 80% of the invoice amount can be converted into a quick loan. You can use the cash to grow your business.

Not too dependent on your history

Applying for traditional credit products takes a lot of effort. And financial institutions such as banks will most likely take a look at your business history before considering loan approval. If you had slow periods in the past, your loan approval could be affected. But invoice financing puts more weight on the value of outstanding invoices. This makes invoice financing more flexible and more suitable for SMEs that have great sales volume and bright future prospects but short history.

Less paperwork

Ever tried applying for credit in the past? It’s likely that the process was tedious and you had to prepare and submit a substantial amount of paperwork. If your business is quite new, you’ll most likely have to provide a business plan along with cash flow projections. But with invoice financing, the lender will conduct a review of your business and ask for less document submission. They will make an offer post-review and if you accept the invoice financing offer, legal documents will be arranged. Related: Introducing Invoice Financing V2.0 from Funding Societies