Invoice Financing: a Way to Infuse Money into your Company
If a company invoices clients, then they may need to wait a certain number of days before they get paid for the products which they have delivered. This is perhaps convenient for customers, but it can put stress on that company’s cash flow.
Invoicing clients means businesses have earned a surefire sale, but they have to wait for payment. Meanwhile, that company must carry on its operations as usual. It has to pay employees and purchase supplies, which is possible only if they have enough networking capital. These things should be handled even when customers have not made their payments on time. For several businesses, dealing with this could just be a challenge. For some companies, it might even cost them business. Several companies get cash infusion in the form of debt to keep their lights on, so to speak, but this is not necessary at all times. A fine alternative that several businesses fail to make use of fully is invoice financing.
It refers to the process where a company sells its invoices or accounts receivable to a factor. This third-party company will buy accounts receivable at a discounted price, usually between 70% and 90% of the invoices’ full value.