Choosing the right type of finance can be challenging. Often with a lack of knowledge of the many solutions available, business owners can find it a difficult task choosing a funding solution that will be the most effective for their situation. If your firm is growing, you will know that having a funding solution that supports that growth is vital. Some forms of finance can be restrictive and not flexible enough to cope with the demands of a growing business.
Invoice Finance is often an excellent solution for firms that are expanding, and in many cases, it’s specifically well-suited for growth. There are many reasons why business owners who are looking to fund growth should choose Invoice Finance:
- Improved Cash Flow:Expanding businesses often face cash flow challenges as they take on more orders, hire new staff, or invest in stock and equipment. Most firms will have invoices that are outstanding – perhaps 30, 60, or even 90 days. Invoice finance allows immediate access to a significant percentage (often 80-90%) of the value of these unpaid invoices. This injects much-needed funds into the business, bridging the gap between providing goods/services and getting paid by customers.
- Scalability: Unlike traditional loans that have fixed limits, the funding available through invoice finance grows as your sales grow. As you issue more invoices, the amount of available funds increases proportionally, providing a flexible and dynamic source of working capital that scales with your business expansion.
- No Additional Collateral (Typically): In most cases, the unpaid invoices themselves act as the collateral. This means businesses don’t need to put up additional assets, making it a more accessible funding option, especially for younger or rapidly growing firms without a long track record or extensive physical assets.
- Reduced Bad Debt Risk: If a firm chooses factoring, the finance provider takes on the responsibility for credit control and invoice collections. Some even offer bad debt protection, which can be invaluable for expanding businesses that might be taking on new, larger clients or entering new markets.
- Focus on Core Business: By outsourcing the time-consuming task of chasing payments, businesses can free up their internal teams to focus on core activities like sales, operations, and strategic growth initiatives.
- Maintain Equity: Unlike equity financing, invoice finance doesn’t require you to give up a portion of your business ownership or control. You retain full ownership as you grow.
- Flexibility:Many invoice finance providers offer flexible terms, which can be advantageous for businesses with fluctuating cash flow needs.
In summary, invoice finance is a highly effective form of funding for firms looking to grow. Its flexibility and scalability provide business owners with a relevant form of finance to support growth plans.
Link to further reading
Why UK businesses should choose Invoice Finance.
