So, you are the proud owner of a business, an entrepreneur all set to disrupt the market with your business ideas. You have contracts for your goods/services from big and small companies, that's great!
But hold on, your payments are stuck for a time period of 30 to 90 days, and your business goes through cash flow stress, which is definitely not healthy for your business growth. So, what do you do now? Getting a loan and paying it off with the interest amount can be a solution, but it is neither hassle-free nor a sturdy long-term plan. This is where invoice factoring dives in!
What is invoice factoring?
Invoice factoring also termed as accounts receivable factoring or debt factoring, is a finance solution. Here the businesses raise money by selling their outstanding invoices to a factoring company at a discount.
The said invoice financing solutions involve a third-party lender (a factoring company) that lends cash against the customer invoices which are yet to be paid. Invoice factoring helps the business to receive most of the invoice cash immediately rather than waiting for weeks or months to get paid.
At Skyscend, we know how much your business growth means to you and how hard you toil to keep it sailing. But how can you let go of the hard work with the cash tied up with the unpaid invoices?
Thus, with the invoice factoring solutions, you can unlock all the cash tied to the future payments and re-invest that capital. Also, it saves you from wasting your valuable time collecting payments or figuring out the funding solutions.
How does invoice factoring work?
As already mentioned, invoice factoring allows you to sell your unpaid invoices to a factoring company like Skyscend. The factoring company then verifies your raised invoice and pays you almost the bulk of the total amount you have initially charged to the client. Thus, allowing you access to quick cash before the clients pay for the goods or services received.
The amount of funds available or lent is typically determined as a percentage of the outstanding sales ledger or debtor book. However, this may be restricted by a specific condition, such as limiting exposure to a single large customer.
Let us understand the process in a simplified manner:
1. You provide goods or services to your customers.
2. You then invoice your customers for those goods or services.
3. You "sell" the invoices to a factoring company.
4. The invoice factoring company verifies your invoices.
5. After verifying, the invoice factoring company immediately pays you the bulk of the amount, which is about 80-90% of the invoice value.
6. Later, your customers pay directly to the factoring company.
7. Once the invoice factoring company has been paid in full, they pay you the remaining amount after deducting their fee.
When should your company use factoring?
How do you know if you should opt for the invoice factoring solution? Do you even need such a solution, or should you just wait for the payments to arrive after the set duration?
The answer is simple is the elongated time frame of payments going to stress your company's cash flow? Is it going to incur your loss, particularly during your profit seasons? If the answer is yes, invoice factoring is your ultimate solution.
If you have multiple outstanding invoices and your company's cash flow is under stress, you should go ahead with invoice factoring.
You can bridge short-term expenses or repay a loan with the invoice financing solution. You can also support your business with adequate capital and take advantage of the seasonal business opportunities that come your way. Invoice factoring helps immensely with the cash flow, which can impact your trade relationship.
Thus, invoice factoring is an excellent funding unravelment if any of such scenarios have arisen in your company's growth landscape.
Advantages of factoring
Invoice factoring is based on access to quick cash and a seamless process, where the cash is released within seven business days or less based on the terms of the factoring company. But what are the advantages of you opting for factoring:
· You get the opportunity to improve the cash flow and make it more predictable.
· Better cash flow will give your business a better chance of survival and growth.
· Access to quick cash will help your business expand sales and marketing and add inventories, allowing you to focus on the additional production and service staffing.
·Unlike other traditional funding options, invoice factoring doesn't require you to pledge any business or personal assets as security. The invoice itself works as collateral.
Your company is suffering from gaps in the working capital; thus, your current projects are at stake due to the lack of streamlined cash flow. You have your funds tied up to the slow-paying accounts receivables.
Worry not. Skyscend is proud to present its invoice factoring solution and help you with your seamless business growth.
Skyscend also facilitates invoice financing for small businesses to secure early pays on their receivables, and the opportunity to manage cash flows effectively. So, if you are looking for similar solutions, enquire now and get your company leveraged to the best heights.
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