Invoice financing is widely accepted as one of if not the most effective way to free up cashflow or alleviate cash flow problems caused by late invoice payments. However, there are common misconceptions that can dissuade businesses from taking advantage of this valuable tool. Here we offer up a brief explanation to dispel these myths
Invoice Financing Should Be A Last Resort
Invoice Financing whilst an incredibly useful tool to unlock cash in a sales ledger for a company who is facing significant cash flow challenges, is not just a tool that can assist a company in serious trouble. It is also a highly beneficial solution to companies who have a good turnover but require a cash injection to cover costs for a multitude of opportunities for a business such as funding growth and servicing customers while waiting for invoices to clear. Invoice Financing is a proactive approach to securing your business and cash flow, as opposed to placing your business at risk of accruing costly debts
Invoice Financing Is Too Expensive
Factoring and Invoice Discounting fees have become more competitive, faster to obtain, and often more cost effective than the long-term interest charged over the duration of a loan term. Invoice Financing debt is paid back when your customer pays, so you’re just deducting a percentage from your margin to cover the service. Additional services on offer with this solution can include credit control and credit insurance which may be provided at a more cost effective and efficient manner than owning in house
Customers Will Think I’m In Financial Difficulty
According to UK Finance, the number of businesses using invoice Finance as a form of lending remains steady at more than 45,000 providing clear evidence of Invoice Financing’s valuable contribution to business growth. Companies utilising this solution range from start up businesses, small entities and large corporations turning over in the £100’s of millions. This can be used as a selling point to demonstrate your foresight by streamlining your processes, and to explain why superior cash flow will enable you to service your customers more effectively and efficiently
Collections May Not Be Dealt With Sensitively
It’s natural to be concerned about your customer relationships, especially if you are worried that your customers may be pursued for debts in a different style to your own methods. Not all cash flow solutions require that you ‘hand over’ your cash collection to the lender, for example if you choose certain solutions you can continue to collect against your customer invoices, as normal. If you decide factoring better suits your needs, you can be reassured that factoring companies are not debt collection agencies. Instead, they benefit most from periods of increased trade, so will never risk jeopardising a customer relationship by harassing for payment, you are still in charge of your customer relationships and the lender wants to see healthy relationships with your clients for your growth and long-term stability, and let’s be honest, the stronger and bigger you are the better it is for all parties financially! A professional and courteous approach, combined with advance credit checks, means invoices are more likely to be paid efficiently, and services delivered to the highest levels
To discuss the options available to you, get in contact with one of our specialist finance brokers today for a free consultation
