All small businesses need funding. Firstly to get off the ground, then to grow and expand but in the current economy and amidst high interest rates, it’s difficult to secure funding from more traditional sources. This has led to a number of small & medium sized enterprises (SMEs) struggling to get started and alternative funding such as factoring or invoice finance being viewed as unsavory and be avoided, being seen as a last resort when it comes to cash flow arrangements.
Conversely, an overdraft facility seems to be the preferred method but this is an expensive alternative and not as flexible as invoice finance. This is because the traditional high street banks do not put a value on debtors, in other words, the value of business’ unpaid invoices is not taken into account.
With invoice finance, we take a look at the potential fast access to funds with invoice discounting, as an element of their invoice finance service.
What is invoice finance?
Invoice finance is a type of lending where funds will be released to your business against invoices you have issued. In other words, the value of your invoice book and by choosing invoice finance from Aldermore, you’ll receive an agreed percentage of your invoices upfront, as much as 85% with the remainder (less an admin fee) being paid once your client has paid their invoice in full, providing flexible cashflow for those all important business decisions.
Take back control of your finances!
Get a FREE checklist for the money moves to make in the New Year.
Also get new articles, advice, and tips delivered right in your email inbox with our newsletter!
What is invoice discounting?
Invoice discounting is a form of invoice finance, giving you fast access to some of the funds your customers owe you and instead of Aldermore doing the chasing of outstanding invoices on a company’s behalf, it leaves the collection of payment up to you. It’s a cost effective way to boost your cashflow and will also retain confidentiality with your customers, as you’ll be collecting the payment, clients won’t know you’re using an invoice finance service.
What are the advantages of invoice discounting?
The main advantages of using an invoice discounting service include:
- Improved cashflow by releasing funds
- Access to an ongoing supply of cash that grows as your sales do
- Assistance with financial planning as you know exactly when you’re going to be paid
- Receiving cash instantly helps with capital investment
- Flexibility for your business
What kinds of business usually benefit from invoice discounting?
Most businesses will benefit from an invoice discounting service and some include:
- Distributors / brokers/ vendors
- Business service providers
- Manufacturers and wholesalers
- Transport and logistics firms
- Employment agencies
- Engineering companies