Steady your business cash flow with invoice financing

As any owner of a small to medium-sized business will tell you, cash flow is king. With a healthy inflow and outflow of cash, you can ride out seasonal fluctuations, take care of unexpected bills and even think about scaling up your operations. But one of the biggest risks to good cash flow is late payments. Here’s how invoice financing can help keep your business afloat.

What is invoice financing?

Invoice financing is a business lending solution that lets you borrow against the money you are owed by your clients. Also called accounts receivable financing, it’s a helpful way to steady your cash flow in case of late or missing payments.

Because many banks see small businesses as a risk – especially compared to larger organisations with a strong credit history – invoice financing is an alternative solution that provides the cash you need by borrowing against the amount you’ve already invoiced to customers.

In most cases, the lender advances a percentage of the total invoiced amount, with the business paying back the money in instalments plus interest as soon as the invoice has been paid.

Invoice financing is a speedy cash-flow solution

The biggest pro of invoice financing is the speed at which businesses can access vital cash. Because you are borrowing money against the invoices you’ve already sent out, lenders are more willing to provide you with a quick loan when you need it most.

Depending on the lender you go with, the funds are usually available within 24 hours of you submitting an invoice for financing. That means you can get access to working capital quickly, and not have to worry about filling out lengthy applications or undergoing comprehensive credit checks every time you need to boost your company’s cash flow.

How does it compare to other lending options?

While invoice financing is a very specific lending solution, it can be used to cover a variety of everyday business expenses. Not only that, if you are scaling up then you can use the short-term loan to finance a portion of the expansion. This is because the turnaround time on accessing cash is usually within a day, and there is no collateral required.

Ultimately, lenders care very little about your credit history when it comes to invoice financing, simply because the cash they are loaning you is based on a real business transaction that has already taken place – the customer simply hasn’t made the payment yet. That means you can avoid jumping through hoops for a conventional business loan and get quick access to funds without having an exorbitant amount of debt hanging over your head.

Beware a few minor risks

Like any loan, it’s important to conduct due diligence on invoice financing if you are considering some cash flow support. Lenders will want to know exactly how you plan to use the money, and in some cases they may restrict spending if they deem your intentions aren’t within the bounds of the lending agreement.

It’s also worth considering the possibility of a customer not paying. If you don’t have enough money to cover the repayments and interest, then failure to fulfill your invoice financing obligations could, in the worst-case scenario, result in a lien being put against your property or even potential bankruptcy. While such a risk is extremely miniscule, it’s important to know what you are getting into when applying for business credit.

“We work with business owners across all industries who often need access to cash to keep their business running smoothly,” says David Crook , Managing Director at Nero Financial. “In most cases, invoice financing is the ideal solution as it doesn’t rely on collateral and the owners can be back on their feet with a much healthier cash flow within just 24 hours of submitting an invoice.”

If invoice financing could help your business stay afloat – and help you pay your bills – there’s no better time to start than now. Contact Nero Financial today or call 1300 025 949 to access our smart cash-flow financing options.