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(844) 860-2288
(844) 860-2288
Invoice financing is a flexible financial product that many business owners depend on. It’s serves as a way to secure fast working capital. If your business provides goods or services to businesses or municipal governments and you issue invoices to them, you can qualify for this type of financing. Many businesses cannot obtain traditional financing from their bank and turn to alternative lenders that provide this type of financing.
With invoice financing, you have an opportunity to borrow funds against your uncollected receivables. Don’t wait until your customers take their sweet time to cover your invoice. More importantly, don’t let unpaid invoices hurt your cash flow and hold you back from freely operating your business. When you borrow against your invoices, the lending company would provide an advance of anywhere from 80-90% of your invoices value up front. The funds can hit your account as fast as 24 hours. The remaining 10-20% from the 80-90% financing would be retained by the lender as security and would reimburse it after the interest, fees and advance is repaid.
Some lenders could advance up to 100 percent of the invoice amount value based on qualifying invoices. Invoice financing provides business owners with control in terms of how much working capital they need and tap into receivables that they want to pledge.
With invoice financing, the invoice acts as a collateral for the funds received. This type of financing helps businesses to avoid having cash flow issues while waiting for receivables in being covered in the near future. With many businesses, outstanding receivables tend to come late, and small business owners cannot afford to wait.
The major benefit of invoice financing is that applying and obtaining funds all takes online. With a secure and safe online portal, you can obtain an approval and funds in a fast and convenient matter. Businesses can receive funds as little as 24 hours. The repayment period is anywhere from 12 to 24 weeks with automatic debits that would occur from your checking account or give you the flexibility to pay it yourself. It’s more than enough time to get your business affairs in order.
The fast process helps business owners to take better control of their working capital needs by covering cash-flow gaps. When you borrow against your invoices, you can get paid right away. Just think of how many times you collected late invoices. Business owners shouldn’t wait to collect their receivables in order to undertake more work. This product doesn’t have rigid requirements as banks, you can qualify with low revenue, as a new business or with poor credit score. Your credit score and revenue doesn’t play a major role as it would with other types of financing products.
As a business owner you would have an ability to tap into an unlimited capital based on your incoming receivables. With invoice financing, you would also build stronger business credit and retain your cash. When business owners consider any type of financing, one major decision factor comes from collateral. With invoice financing, you don’t have to pledge your business or personal assets to obtain financing except the invoice that you are pledging. Other important factor is that lenders do not ask for personal guarantee, which provides business owners with a peace of mind and security of limited personal liability.
The major qualification is the value of your invoices as well as when the invoices are due (30-90 days). Lenders prefer the invoices to be due within 30-60 days versus 90-120 days and offer better terms to business owners due to lower risk. The other major factor is what type of client that owes money for the invoices. The larger the client, the lower the risk and better overall terms. Lenders offer favorable rates and terms to business owners that deal with governments or that have municipal contracts. They also have a list of preferred industries such as retail, manufacturing, healthcare, agriculture or business consulting that could greatly benefit from favorable terms.
As with any type of financing product, there are some disadvantages to consider. One of the main disadvantages is high cost or interest associated with this type of financing. The rates based on annual percentage rate could be anywhere from 14-35% depending on the risk and credit factors. Another factor is that fees associated with financing could be anywhere from 2-5%. Besides the rates and fees, there is a limit in who can benefit from qualifying. Lenders do not cover invoices from B2C businesses versus B2B.
A business is as good as its cash flow and reputation. When you are obtaining funds from your invoices, your customers won’t know of your cash woes. The lender does not take ownership of the invoice, they just hold it as collateral. With factoring as a similar financing product, you sell your invoice outright and the factoring company takes ownership of the invoice. Your customer would know that you sold the invoice because the factoring company would collect the payment directly from the customer.
With invoice financing you have the freedom of choosing how much funding you need, and which invoices you want to take an advance on. With a business loan, you might take more funds and pay interest on funds that you might not need versus invoice funding where its more custom. This helps businesses to obtain funds fast exactly when they need it. This type of financing is very similar to a revolving line of credit.
Your receivables shouldn’t keep you waiting, as a business owner you need to concentrate in operating your business freely. With invoice financing, you are covering your cash flow gaps and saving cash for other business expenditures. At Creditfy, our technology enables us to provide fast business invoice funding. With our fast funding process, we can deploy the funds to you as little as 24 hours. As soon as we receive your invoice, the sooner we can provide funding to your business!