Most small or new distributors and re-sellers have limited payment options with their suppliers. Usually they have to prepay for the goods, pay COD or at best, pay shortly after delivery. However, when they sell their products to customers, they have to give them 30 to 60 day payment terms. This creates a situation where they have quick expenses coupled with slow revenues. Unless the distributor has a cash reserve that can be used to handle day to day expenses, this situation can lead into a serious cash flow problem. Most small and growing distributors don’t have a substantial cash reserve since are invested in growing the business. One way to solve this problem is to use invoice financing.
What is invoice financing?
Invoice financing accelerates the revenues due to your company from customers. This provides you with the necessary funds to meet business expenses and focus on larger orders. With invoice financing, your customer does not have to pay sooner. Rather, a financial intermediary advances funds to your company using your invoices as collateral. The transaction settles once invoices are paid by your customer.
How does invoice financing work for re-sellers and distributors?
Generally, invoice financing integrates easily into most companies.It works as follows:
- After completing your work, you invoice your client
- You send the financing company a copy of the invoice for funding
- Your company gets an immediate 80% advance on the invoice
- Once your client pays for the invoice, you get a second advance of 20%, less the financing fee
Get an invoice financing quote
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Advantages of invoice financing
One of the biggest advantages of invoice financing is that it provides re-sellers and distributors with predictable cash flow. Your company gets immediate access to funds without having to wait up to 60 days to get paid by customers. Another advantage of invoice financing is that the funding line is directly tied to your sales and can grow with your business, provided that your sales are to credit worthy commercial clients. This makes it an ideal business financing solution for manufacturing companies.
Does your company qualify?
Qualifying for invoice financing is easier than qualifying for other types of funding. The general requirements are:
- The company must be in operation. We are happy to work with start-ups as well
- You must have commercial or government clients that have good commercial credit
- You must use the working capital to pay suppliers, employees or company expenses