Outstanding invoices can make a dent in any company’s budget. Fortunately, you can solve this by selling your outstanding invoices for immediate cash through invoice financing! Invoice financing involves furnishing the lender with unpaid sales invoices. They provide you with a loan in the amount of the unpaid monies which is great as a source of working capital. Lenders are even known to offer as much as 80% of the company’s gross invoice value.
In order to benefit from this cash relief, businesses agree to pay the lender a percentage of the total invoice amount in exchange for their services. As each customer pays their invoice(s), the loan amount is adjusted as is the sales ledger. The sales ledger is used to keep track of pending sales invoices and payments. Another advantage of invoice financing is that you are not charged monthly interest fees.
The lender will decide to accept or refuse invoices based on customer credibility and the duration of credit. They wouldn’t want to take on excessive risks. Some lending companies have an approval period of 30 to 60 days. In general, invoice financing and trade finance is aimed at larger businesses with a large turnover. This is because the lending company is more confident in their financial abilities, provisions and fund management. There are, however, some companies who will lend funds to smaller businesses in need.
Certain lenders offer Trade finance, Purchase finance and Invoice finance. Trade finance involves requesting a loan based on confirmed orders of pre-sold finished merchandise. This cash is used to pay suppliers. Purchase finance is used to buy stock, goods and similar items for your business. A security deposit amount is agreed upon before such a loan can be approved.
For companies who need operations to run smoothly and without any unnecessary financial hiccups, Invoice finance is one of the best solutions. There are many reputable companies in this industry which ensures that you will be provided with all the best possible options. By having all the information you need, you can explore each and every option before making a truly informed and very important business decision.