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3 Ways Invoice Financing Can Help SMEs

invoice financing sme

Running a business is no easy task, so finding ways to streamline and simplify common tasks can instantly enhance overall productivity. Invoice financing is a way to help boost productivity and cash flow. This type of Small and Medium Enterprise (SME) financing comes in two forms: a revolving line of credit using receivables to secure it and getting immediate payment by selling invoices to an invoice financing company. Learning more about how this type of SME funding can benefit your business allows you to decide if it is right for you.

Faster Access to Cash

SME financing with invoice financing allows you to have access to your money faster from your receivables. This is especially important for smaller companies that do not have a wealth of available cash flow on hand. When this money is more readily available, you do not have to worry about getting behind on important elements, such as your employee payroll, regular monthly bills and even unexpected expenses. Going into debt can be disastrous to smaller companies and limited cash flow is a common reason for mounting debt. Since this enhances your cash flow, you have a reduced risk of your debt building.

Even if you provide your customers with longer payment terms, this will not have a negative effect on the total cash you have on hand. This is considerably faster than many other forms of credit, such as a business loan, and typically a more affordable and flexible choice.

Low-Risk Option for Borrowing

It is inevitable that most smaller companies will need to borrow money at some point to expand the business, make repairs or upgrade equipment. Borrowing from banks can be a viable choice, but there is typically a significant risk involved. When you utilize this financing option, the risk is very low. You are borrowing capital just like you would with a loan or even a business credit card. However, this is levied against the invoices that you have out.

This means that you do not have to put up any additional collateral to take advantage of this option. You also do not have to worry about losing your business, or other assets, such as your home, if things do not work out exactly as planned.

Maintain Your Business Credit

The credit scores you and your business have are critical elements of your overall success. With poor credit, you may find it difficult in the future to purchase real estate to expand your business or acquire important equipment, for example. With this financing option, the company you work with takes a fee from each invoice as part of the payment plan. This means that you will not have major monthly payments like you would with loans or other credit options. The likelihood of falling behind and tarnishing your credit is very low.

Invoice financing can be a viable option for an array of businesses. Before choosing to use this type of SME funding, just make sure that you plan in advance so that everything goes as smoothly as possible.

Download our free Invoice Financing Factsheet here:
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Joseph Seah

Joseph Seah



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