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While it is clear to many business owners that invoice finance is a great way to protect themselves against cash flow problems, not everyone realises that it is also a very good way to raise funds for growth.
In fact, used correctly invoice finance is a very real alternative to a business loan – although of course, it can also be used in conjunction with other forms of funding.
In some countries, such as the US and the UK, invoice finance is becoming the first choice for many business owners who, having been informed of the various possibilities available to them, chose to raise cash against their accounts receivable as it is sometimes cheaper, faster, safer and more easily available than either a business loan; bank overdraft or equity finance.
This is a key question for many businesses, and one which invoice financing can answer very effectively: you can secure up to 80% of your monthly invoice values. So the more you invoice the greater the $ value you can access.
Just to recap, remember that invoice financing can be defined as a business raising funds against the value of its outstanding invoices. Companies which sell to other businesses usually get paid between 30 and 90 days after their invoices are issued, and a nimble invoice finance provider such as OptiPay can deliver around 80% of the face value of each invoice within 48 hours (Don’t worry, you get the rest later).
This means that a business whose customers pay on average after 60 days can raise an amount equivalent to 80% of two months’ turnover. That link between a business’ current turnover and the amount it can raise is a key advantage of invoice finance. Unlike a bank loan, which is based on past performance and credit ratings, invoice financing always reflects the current state of your business. It’s even more recent than your latest accounts, and is effectively a revolving facility that constantly updates the funds you have to draw on based on how many contracts you can fulfil.
A B2B business with expansion plans and a need for serious funds to invest in order to implement its ambitions can therefore raise a large lump sum from its invoices – in many sectors, two months turnover may be more than firms can realistically borrow with a conventional loan. The cash can immediately be used to buy the supplies and equipment and hire the workers needed to fulfil bigger orders.
With a nimble funder like OptiPay, a company can make the necessary arrangements and get the cash within days. This is much quicker than applying for a business loan from the bank, but the advantages don’t end there: With a bank loan, a business has to decide on the amount it thinks it needs, and will then be tied into that debt for a period of one to several years, having to pay principal and interest each and every month until repaid. During that time, the repayments will drain its cash flow and it will be hard to arrange further finance.
With invoice finance, however, you can raise more money the moment the next, bigger set of invoices are issued for the jobs your initial investment made possible are sent.
More and more businesses are finding that invoice finance, used as a revolving facility that gives them immediate access to their own cash, is the perfect way to fund a growing operation. As the invoices you issue get bigger, so does the money available to your business. Using a fintech platform that puts them in total control, owners of SMEs can finance their vision for the company without ever needing to pay fixed interest, lock the business into a restrictive covenant, or worry about meeting strict repayment criteria.
To find out how much you could raise – and how little it costs – contact OptiPay today. You could be putting your growth plans into practice by the end of the week!
Get tomorrow’s cash flow today.
This is Paul, he is one of the directors of UVS, a labour-hire provider to the construction industry. Here’s what he has to say about how OptiPay was able to help his business grow and succeed. Contact an OptiPay expert today to see how we can help you.
OptiPay offers several different funding solutions and services, one or more of which charges no interest and has no long lock in contract period, called the Fully Flexible funding option. Conditions, fees and charges apply to some of the Services provided, which may change, or we may introduce new ones in the future. Full details for all funding options (Services) including any fees and charges which may apply, is available on request. Lending criteria apply to approval of credit products. This information does not take your personal objectives, circumstances or needs into account. Consider its appropriateness to these factors before acting on it. Read the funding agreements provided, for your selected funding solution (product/service), including all the Terms and Conditions contained in agreements provided, before proceeding. *T&Cs: Minimum 12-month invoice funding contract with OptiPay. Direct clients only, offer doesn’t apply to broker introduced clients. All standard credit terms and conditions apply including credit assessment. Not applicable to existing clients.