The harmful effect late payments have on cash flow is one of the greatest challenges small businesses face. Many small enterprises are primed and ready to grow. They are profitable, viable and the demand for their products and services is there. The only thing holding them back is the fact that the cash they need to buy more stock, new machinery and bigger premises are sat in their customers’ bank accounts. Why? Because more and more businesses, particularly larger operators, are taking longer to pay their suppliers than ever before.

According to a survey by Zurich, British SMEs are owed a total of over £255billion by their customers, with

  • One in five owed more than £25,000
  • One in ten owed £100,000 or more
  • And one percent waiting for more than £1million

Looking at those figures, it’s no wonder small businesses are struggling to grow.

The role invoice finance can play

Invoice finance is one-way businesses can release the cash tied up in unpaid invoices to finance growth. Invoice finance is simply a way of using existing assets i.e. the company’s debtors, to increase the money in the company’s cash account. The result is that the business can afford more, and do more.

Rather than waiting for 30, 60 or even 90 days to be paid for work you have already done, an invoice finance provider will pay up to 90 percent of the value of the invoice, sometimes within just 24 hours of it being issued. The balance of the invoice is then made available when the invoice is paid by the customer, minus the finance provider’s fee.   

Why is invoice finance particularly well suited to the needs of small businesses?

There are some benefits that make invoice finance particularly well suited to funding small business growth:

  • No further debt – Invoice Finance provides small businesses with the working capital they need without having to take on further debt. The only security required is the debtor book itself, and there are no personal guarantees.
  • Improves planning – Small businesses will know exactly when they will receive payments. This makes it much easier to plan for the future and take advantage of opportunities as and when they arise.
  • You can borrow more as you grow – Invoice Finance is unique in the way the amount you can borrow grows in line with the business. As your sales increase, so will the amount of finance available. This makes it perfectly suited to small, fast-growing companies. 
  • It frees up time – As part of a factoring agreement, the finance provider will credit check prospects and chase outstanding invoices on your behalf. The result is that you have more time to concentrate on growth.

It’s time to grow

Could invoice finance help you realise the full potential of your small business? Compare the UK’s leading invoice finance companies at Business Expert or call us on 08000 24 24 51 to find out more.