As a businessman, you should know that there can always be a long gap between actual cash flow and revenues, especially if you have clients demanding payment terms and waiting until the last day to remit.
However, there is a solution to this matter, and that is by borrowing the value of invoices you’ve just issued. This solution is called invoice funding. So in this blog, you will understand more about invoice factoring services and how they would help a business improve the working capital and safeguard the cash flow.
Understanding Invoice Financing
Invoice funding is a form of short-term borrowing extended by the bank or invoice funding companies to their clients based on unpaid invoices. Invoice funding is usually carried out to meet the company’s short-term liquidity.
The concept of invoice funding is just simple. Lenders would advance most of the value right away instead of waiting for weeks or days for invoices to get paid by customers. That’s why businesses should understand an invoice advance loan, as it means getting paid faster for the completed job. That way, businesses can just focus on running their business.
Why do Companies Get an Invoice for an Advance Loan?
There are advantages if businesses consider what is an invoice advance loans like any funding option. These are:
1. It could give quick cash to businesses, as it is a clear advantage that a company is in control of raising cash for your business. It could be available as soon as the invoice is issued and can be used to help in growing the business.
2. Invoice funding also has a quick turnaround compared to other business loans. You can avoid waiting again for the payment period by submitting your business invoice for invoice financing.
3. There will be no risk as to assets, as invoice funding is an unsecured business loan in place of invoices. You never have to offer physical assets from your business.
4. Lastly, it could increase sales, as it helps convert credit sales into cash. This only means that SMEs enjoy quicker growth and development in just a short amount of time.