Article provided by Capitalise
Are you frustrated about the 30-, 60- or even, 90-day payment terms that put pressure on your cashflow and impact your business health?
Invoice finance is a funding solution that can help you release cash from your outstanding invoices to ensure you have enough money in the business to pay your suppliers and continue growing.
We’ve partnered with Capitalise to help you better understand this funding option. Read on to see if invoice finance could help your business work towards healthier numbers and cashflow.
How does invoice finance work?
Invoice financing works by sending your invoice details to a lender who pays a percentage of the invoice total to you upfront. Often within 48 hours. So, you don’t have to wait. The aim is to help your business ticking along while you wait for payments. When you do get paid the invoice, you pay the finance lender back.
There are two main types of invoice finance: invoice factoring and invoice discounting.
With invoice factoring, the lender is essentially buying an invoice from you. Meaning they will contact your customer if the payment is overdue and collect that payment for you directly. This is known to result in faster turnarounds. The level of involvement and direct communications means that your customers will be aware you’re using invoice financing.
Invoice discounting is similar, but it’s up to you to chase your customers for payment. Essentially, the lender is advancing you a portion of the invoice, knowing that you’ll pay them back once the payment has been paid. You’ll be responsible for chasing the payments. Making it a good choice for more established businesses. As all the communication comes from you, your customers will not know you are using invoice financing.
What are the benefits of invoice finance?
Many people can find invoice finance confusing. But it’s simply a funding option that allows you to get paid the majority of your invoices within 48 hours. Helping you to better cover costs and get on with investing in your business. It’s a fast and flexible way to maintain healthy cashflow, pay suppliers and fund new projects. Without the need of large business loans or new debt.
Capitalise partners with a variety of lenders who offer this type of finance and can advise you on the best options for you and your business.
How do you apply for invoice finance?
Once you’ve decided invoice finance could benefit your business, you’ll have to apply to your chosen lender with some documentation.
Of course, individual lenders can sometimes require different documentation as part of their application process. But the below should give you a good starting point to gather what you’ll need.
- Aged Debtor Report
- Most recent set of full filed company accounts
- Management accounts
- Last six months’ bank statements
- Sample invoices
- Copy of contracts
Choosing to take funding can feel like a big step. It can feel daunting, confusing, and stressful at times. If you would like some guidance on whether invoice finance is right for you. Or some help with getting to grips with the paperwork, have a chat with Capitalise today.
With a growing panel of South African lenders at their fingertips and an aim to help small businesses discover how to get healthier. They can help you navigate the funding world.