According to The Service Corps of Retired Executives (Score), 82% of start-ups and small businesses fail because owners have a poor understanding of cash-flow management and lack the ability to access working capital needed for growth.
One funding option that is often overlooked is invoice financing. This alternative method does not have the same strenuous requirement process as a traditional bank loan. The main qualification is that a company has customers with outstanding invoices that are paid on terms. Below, we will take a look at why invoice financing might be a good fit for you.
Debt is Not Acquired – Invoice Financing doesn’t require a company to take on any additional debt or have the pressure of paying back debt. The less debt acquired, the better your balance sheet, financials, ratios and investor perception. It also allows companies to receive needed capital without the hassle and risk of a loan.
Quick Funding – To get set up it takes around 5 days. After initial funding, capital can be provided within 24 hours after invoice is submitted.
Simplistic, Fast Process – In order to receive a bank loan, a company has to provide all of their financial statements, have very good credit, and have been in business for a good amount of time, at least 2 years. In contrast, invoice financing lenders are mostly concerned with the credit of the entity (debtor) that owes on the invoice, or your customer. This non-traditional approach takes a lot of pressure off the company in need of money.
No Payback – Because the money advanced is not a loan, it does not have to be paid back. As a result, there are no payments, principal, and interest to be made. This invoice is paid back by your debtor when payment is due and they receive no hassle about early payment, in turn increasing customer satisfaction.
3rd Party Handles Collections – Most Invoice Financing lenders will also handle collection duties for all invoices that are factored, which frees up your time so that you can concentrate on managing your business and not having to worry about collections.