Article: Invoice Financing - Easy Way To Finance a Business
Dealing with slow paying customers can be one of the most challenging aspects of any business. If you sell to commercial or governmental customers, you must be familiar with the fact that you always have to give them 30 to 60 days to pay an invoice. But this can cause problems to most businesses, since few companies have the required funds to cover all their businesses expenses while waiting to be paid. There are employees that need to be paid. There is rent and other costs that must be met – on time.
When problems begin to arise, business owners focus on trying to get their customers to pay sooner. This almost never works. Customers will insist on paying when they do. Some may even threaten to take their business to another company who is willing to wait. When that fails, they try to get a business loan. They soon find that business loans are not easy to get. Fortunately, there is another business financing alternative. One that is ideal for this kind of situation. It is called invoice financing.
Financing invoices provides you with the necessary liquidity to meet business expenses while waiting for payment from the customer. It provides you with funds to pay employees and suppliers. And as opposed to most business financing products, it’s relatively simple to obtain.
The major benefit from invoice financing is the quick payment of your invoices. The factoring company provides you with an immediate advance, usually about 80%, while they wait to get paid. You get immediate cash infusion that helps you meet expenses. The remaining 20%, less a small fee, are advanced to you once the invoice is actually paid.
Since factoring companies finance invoices, their biggest requirement is that you do business with reputable companies that pay their invoices, although slowly. Stated differently, you can leverage your customer base as an asset to obtain financing. Because of how they work, factoring companies can finance startups or companies with a limited credit history. Furthermore, factoring financing lines have no maximums like business loans do.
The cost of the services will be based on your business practices, required financing amount and industry profile. Generally speaking, monthly costs go from 1.5% to 3.5% depending on these variables.
Although invoice financing is not a solution that fits every business, it’s a great solution for businesses whose main challenge is that their customers take a little bit long to pay their bills.
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