Most businesses face tough decisions in a tough economic environment. The need to prevail is not some luxury for business owners; it is something that is at the heart of every thriving business by working long and hard to succeed. Even when sales are made and profits incurred, many clients insist on delayed payment of invoices taking up to 30 days or more. This is where the need for invoice financing comes in as it serves as an innovative tool for the financing of business growth.
While giving from 30 to about 60 day payment term to government and commercial clients is a necessity, at the same time it can drain company’s resources. Very few companies do have the essential cash cushion to insure all their operating expenditures while they wait for as long as 30 to 60 for some clients to pay. As such there are only two options for any business to solve this difficulty.
One which seems to be the simplest solution to the problem is to have clients pay invoices more promptly. This option is in reality rarely works because big corporate clients are used to the norm of getting from 30 to 45 days payment terms. Once this option is taken off the table, these clients will simply go elsewhere. The next option is to acquire business financing, and simply use it to serve as the purpose of covering the cash flow gap.
It is very difficult to get business loans in the existing lending environment. Most organizations have stiffened their loaning requirements and providing business loans to businesses that have a firm track record of flawless financial statements, performance, experienced management and extensive assets. Regrettably, very few businesses can meet these conditions.
The best way out in solving this problem is to simply the use invoice financing as a solution. Invoice financing is an objectively straightforward tool that has gained market traction in past years. Firstly, it eliminates the gap created by the 30 to 60 days waiting period on invoice payment, also helps businesses to gain more steady financial footing. The sole difference between other options or tools and invoice financing is that, invoice financing corporations concentrate on the credit worthiness of the business that’s paying the invoice as the most important basis of collateral. It is this specific feature that makes invoice financing a more viable option for small businesses with strong clients, but little or no credit.
Another great advantage of using invoice financing is that it is more accessible and easy to secure compared to a business loan. To have high value commercial clienteles is the single most important condition for securing funding with invoice financing and that is because it is based on a company’s invoice.