Are you familiar with invoice financing? In case you’re not aware, invoice financing allows you to trade your unpaid invoices for cash advances. This form of financing is different from a traditional business loan because you won’t borrow a one-time lump sum of money and repay it within a fixed period. Instead, lenders will give you 80% to 90% of the total value of your accounts receivables upfront. You’ll receive the remaining 10% to 20% (minus a small transaction fee) once your customers pay their invoices.
With the funds you receive from advancing your invoices, you can expand your business, pay for operational costs, or seize business opportunities. The rates for this type of funding range from .5% to 3% per month and you can receive up to $5,000,000. For more details about invoice financing, check out SMBCompass.
If you’re still on the fence, here are four compelling reasons to try this type of funding:
1. More Manageable Payments
With invoice financing, you can decide how much you want to borrow by controlling the number of invoices you factor. In turn, you’ll have control over how much you need to repay. You also have the liberty to decide whether you want to make monthly or weekly payment within 12 to 24 weeks.
2. Same-Day Funding
Traditional bank business loans take a long time to process. It usually takes weeks before they process your application and fund your business. Invoice financing from reputable lenders won’t take more than a week to fund your business. In fact, according to SMB Compass, it only takes 24 to 48 hours to process the entire application. Furthermore, you only need a minimal amount of paperwork to qualify, unlike other business loans. Once you establish a solid relationship with your lenders, you’ll be able to access working capital even quicker.
3. Hold On to Your Equity
Venture capitalists, angel investors, and private equity usually take a chunk of your business in exchange for working capital. Many business owners start out owning 50% of the shares and then end up with 10% years later. Handing out equity is not a bad thing. In fact, bringing investors into your business makes sense. However, it’s also wise to hold on to your equity and not give away too much. With this type of financing, you don’t have to give away valuable equity just to gain working capital.
4. No Limitations
With traditional business loans, you don’t often have the liberty to demand a loan amount. Once you reached the limit of the loan amount you qualified for, you need to reapply if you need more capital. The amount of cash you can access from invoice financing is directly proportional to your sales volume. This means that the more sales/invoices you have, the more you can factor. As your company grows, you’ll have more access to working capital.
Discover Invoice Financing for Your Small Business Today!
Invoice financing is a great alternative for business owners who can’t qualify for traditional business loans. It’s easy to qualify for invoice financing. As long as you process invoices, you’ll most likely qualify. According to SMB Compass’ team of financial advisors, you’ll need to present the following:
- A/R Aging Report
- P&L and Balance Sheet
- Sample Customer Invoice
- Simple One-Page Online Application