With us rolling into 2024, many start-up business owners will set new goals for themselves and their companies. Undoubtedly, growing the business will be one of these. There are many approaches they could take to reach this goal, such as buying new and improved stock, hiring more staff, and investing in marketing, all are great. However, many start-ups face a common challenge, they can’t adopt any of these strategies because their customers keep paying them late.
With start-ups, cash flow is limited, and many simply don’t have the financial buffer to invest in growth and cover immediate/unexpected expenses. Think about it, you want to invest in growth, but you’ve got to pay wages, buy new stock, plus have something aside for emergencies. On top of this, you don’t even get paid for another 30 days! How does any start-up find the cash to grow?
This is where invoice finance comes in. Invoice finance is a financial tool that allows you to get paid faster. It’s simple, you complete a job and send your invoice to the customer, yet instead of waiting 30, 60, or even 90 days, you get paid instantly. Sounds good right?
If you’re still unconvinced, this blog looks at 9 ways invoice finance can benefit your start-up. If you’d like to book a free phone chat with one of our funding experts, get in touch today!
1. Immediate Access to Funds:
One of the biggest benefits of invoice finance is its turnaround time. Instead of waiting extended periods, invoice finance lets you get paid up to 90% almost instantly. So how does this work? When you submit your invoices to your customers, you also send a copy to your funder, who will forward you up to 90% of the money between 24 – 48 hours.
This hugely benefits start-ups, who might not have much of a cash buffer to fall back on. The immediate payment means you can now meet any immediate expenses on time. Not only that, but you can now buy new stock and inventory without relying on loans or credit cards.
2. Predictable Cash Flow:
With this new-found steady flow of funds, start-ups can better plan their finances. Knowing how much you’ll get paid and when means you can create a more stable cash flow forecast or financial plan. You can now strategically plan where to allocate your resources or what growth strategies to invest in, all whilst avoiding the annoyance of cash flow gaps.
With this stability, you’ll have greater peace of mind, knowing you can confidently go after growth with a reliable cash flow to support you. You’ll also be shielded against sudden marketing fluctuations, helping with better decision-making and ensuring your business continues growing during challenging times.
3. Fueling growth:
Now that you can easily predict your cash flow AND you have the cash readily available, it’s time to grab those growth opportunities. Knowing you’ve got some extra cash handy, start-ups can now invest in different growth strategies. This might be introducing marketing strategies, improving products or services, stocking up on new inventory, or recruiting a shining new team of professionals.
4. Flexibility for Adapting:
45% of businesses fail in the first five years, the landscape is extremely volatile. It is filled with twists and turns which makes for a dangerous journey. Unexpected market trends pop up and sudden unforeseen expenses need paying, all cropping up at random. Start-ups need to be ready to pivot rapidly in response.
Fortunately, invoice finance provides the funds to cope with unexpected changes. Agility can make or break success, and having a financial safety net in place allows you to steer your business in real-time.
5. Less Reliance on Traditional Loans:
Start-ups often find themselves facing an uphill battle when it comes to getting loans. This is mostly due to the lack of credit history or assets the bank requires as collateral. Not only this, but banks are currently tightening their lending criteria due to the current economic conditions in the UK. The result is fewer and fewer start-ups receiving the funding they need.
This is where invoice finance serves as a beacon of hope, offering a viable and alternative funding solution. Invoice finance isn’t anchored in traditional credit checks; instead, it relies on the strength of your invoices. This is important, especially for start-ups, as it provides an opportunity to break free from the shackles of the banks and opt for a more flexible and sustainable approach.
6. Improved Creditworthiness:
We all know how important maintaining a good credit score is, and this applies to start-ups as well. By using invoice finance, start-ups can work wonders for their creditworthiness. This is all due to being able to meet financial obligations on time. If you’re meeting bills, payroll, or other expenses on time, it shows that your business is a reliable payer.
Plus, with invoice finance, you won’t need to rely on lines of credit for business expenses. Such financial stability opens up opportunities for borrowing in the future. Not only this, but it also affects your start-up’s overall financial health. Meaning you could negotiate better payment terms with suppliers or secure more favourable contracts.
7. Simplified Application Process:
Compared to traditional financing options, invoice finance typically involves a less complex and faster application process. In traditional bank loan applications, you may need to provide bank statements, business plans, tax forms, collateral, etc. However, invoice finance involves a less tedious process, usually being turned around in less than a week.
With invoice finance, the process is much more straightforward, often with minimal documentation and hassle. Instead of lengthy waits and exhausting paperwork, invoice finance allows businesses to access funds quickly, and hassle-free. This means you can get a hold of the cash you need, faster, with less hassle.
8. Reduced Administrative Burden:
Many start-ups have to juggle several things at once, including invoice collection and credit control. Both can be a daunting process, and both leave you with less time to focus on core business operations. Consuming valuable time and resources.
Luckily, most invoice finance providers provide a free credit control service, where they handle the collection process. This frees up your time to focus on critical business aspects such as improving products, and services, or nurturing client relationships.
9. Scalability:
With all these amazing benefits in place, your business will undoubtedly grow. And as you grow, you’ll need more money for funding. Traditional loans and credit might not accommodate this growth, but invoice finance will.
The amazing thing about invoice finance is that it grows along with your business. You can easily request increases to your financing limit, meaning your facility will continue to grow alongside your business.
Graham Cooper is a business funding expert at Smart Business Finance, a business finance broker specialising in invoice finance, asset finance, and trade finance.
