Getting paid now rather than in six weeks’ time could be the difference between business survival and kissing goodbye to all of your hard work. Can your business survive post-Covid lockdown?
Lockdown L4 and L3 has been a long road. It’s been stressful for business owners, and no doubt there is a lot of despair out there. Now that we have some more certainty about getting on with business, many of us can breathe a sigh of relief. We made it!
Now you might have a new headache: you’ve run out of cash and not keen on taking out a business loan that you might struggle to meet repayments on. Or you don’t qualify for a business loan or have been declined nor cannot borrow as much as you need. What now?
If you are a B2B and offer credit terms to your customers, it’s still going to be a long wait to get paid for any work you do as the lockdown eases. Waiting until the 20th or the end of the next month to get paid will be an excruciating wait.
So, what if you could get paid for your products and services immediately?
Here’s where invoice finance could save your business. Invoice finance (also known as factoring or debt factoring) is a form of cashflow funding for your business.
How does invoice finance work?
Raise your invoices and send them to your customers as normal. Send copies to your funder straight away. They will pay you up to 90% of the GST-inclusive face value of your invoices. Your funder will collect payment from your customers and release any available funds to you.
It can be a long- or short-term solution
Invoice finance funders have a range of options available. You can use your facility just until your business gets back on its feet or use it long term to ensure a continuous flow of cash into your bank account. Single invoice finance is also an option – get funded against just one invoice (or a batch of invoices to one customer) as and when you need to.
Why opt for invoice finance over a business loan?
Getting a loan is going to be harder than ever. The government loans are unlikely to be large enough to help a lot of businesses and there will still be a cash shortfall. Banks and finance companies are nervous and will tighten their lending criteria for unsecured borrowing.
Invoice finance may be part of a hybrid solution
Invoice finance can be used alongside other forms of borrowing, usually unsecured loans and overdrafts. Because your customers are technically paying back your loan, you don’t have to worry about your ability to make loan repayments. And if it’s going to take a while to get your business back to full strength, meeting loan repayments may be a struggle. Some funders will provide hybrid funding, which is invoice finance AND a working capital loan. Repayments are made from available funds in your invoice finance facility. So you still need to be invoicing enough to cover your loan repayments, but this is a great option if you have been turned down for a loan elsewhere.
Get more bang for your buck
Your funder also takes away some of the ugly administrative tasks like chasing late payments, arranging repayment plans and sending out monthly statements. This frees you up to get on with rebuilding your business.
So what are you waiting for? You’re about to get back to business, so how about getting back to seeing money flowing into your bank account as well?
Find out more
To compare different business lending products, click here.
To find out more about invoice finance, click here.
To compare different types of invoice finance options, click here.