What is invoice financing and why is it a good financing option?
To learn more about invoice financing and why it can be a good financing option for businesses, the business leader spoke with Josh Levy, CEO of Ultimate Finance.
What types of businesses generally benefit from invoice financing and how is this financing structured?
The short answer is any business that sells to another business on credit. We believe that the post-pandemic recovery phase could allow companies to accept manageable commercial debt in a way that they have never done before. This is where non-bank lenders alongside financial brokers and intermediaries play a vital role. Impartial and professional advice is needed more today than ever before, especially for companies seeking financing for the first time or looking to establish the right structure for long-term debt financing.
Businesses looking for an ongoing need for working capital should consider invoice financing as a financing option, which uses the sales ledger as an asset to borrow money. It is suitable for any business, whether it is a limited company, sole proprietorship or partnership. Waiting to get paid is a universal problem for most businesses, regardless of their size or industry. An invoice finance mechanism offers an easy way to unlock the money owed to you on unpaid bills, and it’s financing that most lenders find with dedicated relationship support and support. personal contact.
The companies that can benefit span many industries including manufacturing, construction, recruiting, agriculture, transportation, retail, telecommunications, technology, engineering, health foods and many more. others.
When you apply for invoice financing, the lender agrees on a financing limit based on several factors: your current revenue, the credit terms you offer to your customers, but also your business needs. They will also agree on a prepayment percentage – up to 95% of the invoice value normally – which will be paid into your account as your invoices are issued. When your customers repay, you get the remaining balance minus the lender fees. It is a simple and flexible solution that helps you move your business forward.
What trends are you seeing in invoice financing?
After a difficult 2020 for the bill financing market, with significant distortion and substitution of government loan programs, there is a demand and a return need for working capital financing solutions. Bill financing is very clearly expected to have a key role to play in helping SMEs restructure COVID debt and liabilities, and in providing the necessary liquidity to support pathways for recovery and growth.
Market conditions have forced some lenders to reassess their bill financing strategies, resulting in portfolio sales, market withdrawals and strategic shifts from leading banks and independent lenders.
Product innovation has been mixed in recent years, with a growing number of single / selective invoice finance players emerging as an alternative to traditional global revenue facilities, but this trend has recently slowed down with a a number of these lenders are gradually moving towards a more traditional product offering.
Digital adoption has accelerated over the past 18 months, with a focus on improving the customer experience and ease of use of facilities through automated payments and stream extraction data from banking and accounting systems. By providing easier and faster access to cash, we believe invoice financing can play an important role in supporting businesses on the path to recovery and growth.