Invoice finance is the most commonly used business financing option among small and medium-sized enterprises (SMEs). Many SMEs consider invoice finance as an attractive source of funding because it’s a low-cost method that allows them to get access to debt capital. However, not all invoice finance companies are equal.
To ensure you receive the best financing offer, let’s take a look at some reasons and benefits why invoice finance UK is the best option for your business.
What is Invoice Finance?
If you’re an ambitious business owner, chances are you have a big vision for your company. And with big dreams come big expenses—not to mention lots of time and energy that needs to be put into making those dreams come true. But even in today’s entrepreneurial world, money remains one of business owners’ biggest headaches.
What is invoice financing, exactly? Essentially, it’s when a third party (like an invoice finance provider) buys invoices from businesses that want to grow but need extra capital quickly. In other words: it allows cash-strapped startups to use invoices as collateral for accessing working capital. Pretty cool, right? Here we will mention some advantages why invoice financing could just be what you need to help bring your big idea to life.
Why go for Invoice Financing?
The main reason is speed. Rather than waiting 30, 60 or 90 days for payment, businesses can sell their outstanding invoices to invoice buyers who will buy them at a discount. This process of financing invoices is known as invoice finance, and it’s a fast and effective way for many companies to free up capital.
The main benefit of invoice finance over traditional bank loans is speed; instead of waiting months to access cash, invoice finance allows UK-based businesses to access funds in days – even hours. Other advantages include lower interest rates (which are often negotiable) and no prerequisites such as collateral or personal guarantees.
With so many benefits, it’s easy to see why invoice finance is becoming one of the fastest-growing methods of accessing business funding in Great Britain. Of course, there are drawbacks too – but with careful research, you can protect yourself from the most common risks involved with invoice finance transactions.
5 Outstanding Advantages of Invoice Financing For Your Business
While invoice financing has been around for decades, its growing popularity can be attributed to a few factors. These include its flexible nature, allowing borrowers to pay off their invoices as and when they wish. In addition, invoice financing allows you to get approved for a loan without having to pay a lot of fees or premiums.
Here are the five other main advantages of invoice financing.
- Banks aren’t keen on lending money to new businesses
Banks look at several factors, including past financial performance and plans for growth when determining whether or not to extend financing to a business. Banks are often conservative in their assessment of whether a business will succeed. All of these factors make getting a bank loan difficult—and they also mean that there’s no guarantee that you’ll get one even if you qualify for it in theory.
- Invoice finance offers fixed rates of interest
Loans from banks typically come with variable interest rates, meaning your monthly payment fluctuates along with market conditions (like how much inflation there is). With invoice finance, though, you pay a set rate over an agreed-upon term; once again, your monthly payment doesn’t fluctuate unless you decide to refinance it down the line. That means more predictable costs—and less guesswork when preparing your budget each month.
- It can give you fast access to capital
A lender can process your application for invoice finance and have funds available for distribution within 24 hours, which makes invoice finance very attractive in certain scenarios. For example, let’s say you need $10K to purchase inventory so that you can keep up with demand during peak season.
Without invoice finance, you may need to wait 30 days or more for a bank loan (if you can even get one) and then wait another 30 days before receiving payments from customers. With invoice finance UK, however, those funds could be in your account within 48 hours—which could be life-saving for seasonal businesses that depend on quick access to cash flow.
- You don’t have to worry about future credit
When you take out a loan from a bank, your personal credit score comes into play. If it’s low due to missed payments or other issues in your history, you may find yourself unable to borrow—even if you have good income and assets.
Invoice finance allows companies that otherwise might not qualify for loans to access capital right away. There’s no credit check required since invoice finance is considered a business transaction rather than an extension of personal borrowing power.
- You maintain full control of your accounts receivable
Under a typical loan arrangement, you sign away control of some (or all) of your accounts receivable as collateral against default on payments. With invoice finance, you retain full ownership of your invoices and receive 100% of your outstanding balance upon completion of a sale.
It means you only have to pay back what you’ve received from customers, without handing over rights to future sales proceeds. This gives you maximum flexibility to do business without worrying about what your customer base is doing. You can concentrate on growing sales instead.
Final Thoughts – What to do the Next?
If you are planning to expand your business, need to purchase new equipment or are just starting out, invoice finance is a great option for you. It is available from a number of providers in the UK, however, Finance Hub is a great platform that can help you to grow your business without needing to take on any debt. The funds can be used for any purpose that suits your needs, whether it’s for the purchase of new equipment or additional stock.
Find out more about how it works today by filling in our contact form.