Home Business All About Invoice Financing – A Key Part in Your Funding Mix

All About Invoice Financing – A Key Part in Your Funding Mix

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As per a recent survey from the Financial Times, 46.7% of respondents in India have reported late payments from their B2B customers in FY 2019. Out of this, 30.2% of the invoices went unpaid past the due date. These unpaid invoices from the creditors lead to blocking of your working capital. This is when a business can opt for invoice finance to cater to the requirements of immediate cash flow.

With this financing option, an enterprise can meet its liquidity requirement. The firm can utilise the cash to pay the immediate financial liabilities or even invest in inventories.

Invoice finance is offered by leading financing agencies at an attractive interest rate and other benefits to clear bills receivable. With this credit facility, you can pay off all your outstanding payments and even maintain the company’s working capital needs.

How does invoice financing work?

Follow these steps to avail this credit facility –

Step 1: Gather the invoices of your creditors.

Step 2: Pass on the invoice details to the agreed provider of invoice finance.

Step 3: The provider will pay you a percentage (predetermined) within 1-2 business days.

Step 4: Depending on the agreement with your invoice finance, you can collect the payment if necessary or allow the provider to do this for you.

Step 5: Once the invoices are paid, you will receive a reminder.

Alternatively, you can also avail an unsecured Business Loan from lenders like Bajaj Finserv to meet your short-term monetary crunch.

It can fetch you a hefty sum of up to Rs. 30 Lakh with no collateral. With this credit facility, you can pay for all the invoice dues, increase your working capital and help your business stay afloat. Make sure you go through the eligibility criteria and documents required for a business loan before applying for one.

Benefits of availing invoice finance

The advantages of this financing option include:

a) Helps to mitigate the risks associated with late payments and defaulted invoices.

b) The lending decision against invoices is made faster.

c) This type of funding grows in-line with your business’s turnover.

d) It is more flexible than unsecured business loans and overdrafts.

Invoice financing also ensures that firms need not have to wait for account receivables.

Eligibility requirements

The primary requirements are as follows:

  1. Your nature of business must be B2B.

  2. One must be an LLP to avail this finance.

  3. The company must provide industry-standard credit terms.

  4. Weigh between the lenders that offer the best deal as some sets limit on monthly invoices.

An essential aspect to consider when availing this finance is credit control. Some finance providers insist on managing credit control by themselves, which could hamper your client relations. Therefore, it is best to look into various types of invoice finance that suits your business portfolio.

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