Invoice financing helps businesses borrow money based on the amounts that are due from customers. It is also known as invoice factoring, accounts receivable financing, or simply factoring. These interchangeable terms are used for a financing solution that can turn a business’ current unpaid invoices into fund. It is also a way for businesses to:
- Improve cash flow
- Sustain payroll for employees
- Fund suppliers
- Reinvest in operations
In addition to the aforementioned benefits, invoice financing can build growth earlier than business owners could if they need not to wait for their customers’ payment. Customers usually take thirty to ninety days to fully settle their outstanding invoices. These unpaid invoices can actually be used to expand your business or venture to new business opportunity. Such scenarios could really be frustrating on the side of the business owner. To solve this issue, you can rely on invoice financing to be of great help.
How does invoice financing work?
Businesses are required to pay a certain percentage of the invoice amount to their lender as a charge for borrowing the money. Typically the payment is between 70-90% of the actual value of the invoice. In order to avoid problems when customers are taking too long to pay the services or products that they availed, business owners opt to get invoice financing. It also helps them avoid difficulties to obtain other types of business credit since their credit history will not be tarnished.
In case the business doesn’t repay the borrowed fund, the lenders use the invoices as collateral. Through this process, the lender can also limit risks by not advancing full amount of the invoice to the borrowing business.
Now that many online businesses are becoming popular, invoice financing has become common in many fields. Professional services, IT companies, and marketing companies have all started discovering its benefits.
If you think that invoice financing is ideal for your business’s growth, take a few tips from Capitalize. Check out their website and discover why many small businesses in Singapore trust their company.
Capitalize is a corporate loans specialist firm that helps Small Medium Enterprises (SMEs) and individuals to seek, source and obtain capital from across our established network of up to 30 banks, financial institutions, funding houses and alternative platforms. We are always committed to provide our clients with the most suitable loans according to their needs, from the lowest interest rates possible and at the quantum they require.