Five scenarios where invoice finance can solve your business funding needs

The examples in this article have been provided by Satago, an invoice finance lender. 

As we look tentatively towards a post-pandemic future, businesses are weighing up their finance options. One product you might not have considered is invoice finance.

Invoice finance allows you to advance a percentage amount of your invoices and get paid early for completed work. This amount can vary by lender - you can compare these and other eligibility requirements on our invoice finance chart. Used the right way, it can help you improve cash flow, fund new projects and grow your business.

Here are five scenarios where invoice finance can provide the perfect solution for your funding needs.

If you have customers on 30 to 90-day payment terms, invoice finance can ease cash flow while you wait to be paid. So, you can comfortably afford your weekly/monthly payroll and outgoing bills.

One business that took this approach is Kladworx Ltd, an external façade company run by husband and wife, Peter and Katy Overton. With customers on long credit terms, they needed funds to ease cash flow, so they approached invoice finance provider, Satago.

“I’ve used invoice factoring in the past but found it inflexible.” Says Peter, “We wanted a system that would be versatile and that was moving with the times. We found Satago through a financial broker and found their fees and customer service to be excellent. We soon had the account set up, and were financing our first invoice, which it must be said was in our bank within hours of approval.”

You need to spend money to make money, as the old saying goes.

When your business wins a new contract, you may find yourself with several upfront costs, from hiring new staff members to buying equipment. Without cash in the bank, you won’t be able to make these initial investments, leaving you with no choice but to turn down work.

By using invoice finance to free up money from your sales ledger, you can invest in the resources you need to get the job done. Giving you the opportunity to accept more work and increase your revenue potential.

For example, Carbon247 is a business that provides energy-saving initiatives to homes. Director Vaughen Roberts needed cash in order to grow the business across multiple energy suppliers. He applied for an £850k single invoice finance facility and used the money to successfully scale his business.

If you have a high debtor days average and your monthly outgoing payments often push you into the red, invoice finance can provide a better option than a traditional overdraft.
Unlike overdrafts, invoice finance is designed to help your business grow and plan for the future. Invoice finance is a more flexible solution than an overdraft, meaning you can access more cash without the need for additional security.

Business loans can provide a great solution when you need investment in your company. But what if you need the money now? With the exception of the recently closed Bounce Back Loan scheme (BBLs) and Coronavirus Business Interruption Loan scheme (CBILs), business loans can take a while to set up. Especially if they require collateral.

The Recovery Loan Scheme (RLs) was recently introduced to fill the void left by BBLs and CBILs, but with many lenders yet to be accredited, it has got off to a disappointingly slow start.
The benefit of invoice finance is that it’s fast and relatively hassle free. Modern lenders leverage open banking to make the process even faster and will often be able to provide you with funds within a few days of your application.

Business loans will generally require security. If your company has assets, such as property or expensive equipment, you can use these as collateral when applying for a loan. If your company does not have assets, you may be asked to use personal assets such as your house as security, which not all business owners feel comfortable with.

The great thing about invoice finance is that, whilst you may be asked to sign a debenture or personal guarantee, the lender won’t take a legal charge over your home. That’s because the invoice itself serves as collateral. As long as your invoices are within payment terms and your customers have a decent credit score, you can advance a set percentage of their worth without putting your personal assets at risk.