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Maintaining a healthy cashflow is essential to keeping businesses afloat and many businesses which don’t manage to achieve this quickly finding themselves in need of an Insolvency Practitioner.
While it’s technically possible to run a business on cash terms, in practice it’s not all that likely. Whether you provide goods or service to end users or to other businesses, you have to be able to not only satisfy their needs, but also compete with other businesses who do the same as you. So if all of your competitors provide 7, 14 or even 30 day credit terms as standard, then you’re at a disadvantage if you don’t.
Offering credit, therefore is a necessary evil, however, you’ll have suppliers and overheads of your own and if you typically offer 30 day credit, but most of your creditors give you only 14, then you might find yourself having to budget carefully to make sure there are funds available in the fortnight in between. Waiting it out is one option, but where lack of funds means you can’t take advantage of opportunities, sales invoice finance might be worth considering.
When Might Sales Invoice Finance Be Useful?
This could be a problem if, for example, you’re unable to take on a larger than usual job because the funds you need to buy the materials to enable you to accept it are entirely tied up in that two week buffer between you paying your own suppliers and waiting for payment from your customers.
Similarly, if your business exports goods, then there are a lot of up-front costs you’ll be required to pay in order to obtain or create the goods, arrange for the transport etc and if you only get paid on delivery, there could be a considerable delay, particularly for goods transported by sea, between your outlay for providing the goods and receiving your recompense one the customer takes delivery.
Sales Invoice Finance is a way around this and allows you to access the money you’ve already earned but have not yet been paid.
What is Sales Invoice Finance?
When raising business funds via borrowing, of one sort or another, lenders often required such loans to be secured against the value of a business asset.
If you look at your accounts, you’ll note that ‘Accounts Receivable’; the sum of invoiced amounts owed to you by your customers, is shown as an asset on your balance sheet. Just like any other asset, you’re able to borrow against its value. This is the essence of sales Invoice Finance.
With business overdrafts often being difficult to obtain, invoice finance companies provide what’s essentially an outsourced overdraft for businesses, typically up to 90% of the value of their debtors ledger.
In the modern world, where the largest businesses are often the worst when it comes to late payment of invoices, Sales Invoice Finance provides a cashflow lifeline for the smaller businesses who might otherwise be pushed into insolvency if the gap between them providing a service and being paid for it gets too wide.
At Lines Henry we can help businesses of all sizes release the funds locked away in your debtor’s ledger by helping you arrange Sales Invoice Financing. We work with a number of companies and offer a free initial consultation to assess your needs and point you in the right direction.
Contact us to arrange an initial meeting and let us help your business cashflow by giving you early access to the money your business has already earned.