Invoice Finance
Cash flow tied up in debtors? Fix that with invoice finance.
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Invoice Finance: What You Need to Know
Key takeaways:
- Invoice financing allows businesses to borrow money against outstanding invoices.
- Improve cash flow health to pay suppliers or payroll based on outstanding invoices from clients.
- Improve your business’s liquidity with accelerated cash conversion without collateral.
Invoice Finance Topics
What is Invoice Finance?
Invoice finance is a type of short-term working capital solution. Businesses unlock the value by borrowing against it, ultimately securing funding that helps as a cash flow injection.
Because invoice financing allows you to access a line of credit based on the invoices you have issued, but not yet received payment for, you don’t need any other collateral. Goods or services rendered to a client who hasn’t paid act as security.
Outstanding funds from clients are part of operating a business. Many businesses, such as wholesalers or retailers, make arrangements with customers to purchase large amounts of stock on credit. Using invoice finance helps businesses to receive an income that is temporarily outstanding within the 30, 60 or 90-day period that was arranged with creditors.
The lender typically makes the approved funds available within 48 hours after approval. The amount approved isn’t the exact amount on the invoice, but approximately 80% of this total.
How It Works
- Submit unpaid invoices to a financing provider.
- Receive an advance on a percentage of the invoice value.
- Your customer (debtor) pays the invoice as per the agreed terms.
- The remaining balance (minus fees) is released to you from the financier.
Benefits of Invoice Finance
Invoice financing is ideal for small business owners operating as wholesalers and distributors. However, any business that issues long-term invoices can use this type of financing.
Some benefits of this type of finance include:
- No dilution of equity
- Fast approval
- Funds within 48–72 hours
- Improves cash flow health
- Loan terms from 3-24 months
- Improve your business’s liquidity with accelerated cash conversion.
- Focus on operating and growing your business.
- Navigate cash flow seasonality with predictable streams of income
- Maintain a healthier balance sheet by avoiding unnecessary debt.
How to Qualify
To qualify for invoice financing, you need to meet the following criteria:
- You must have been operating for at least twelve months.
- Annual revenue should be at least R2 million.
- Must be able to show monthly revenue through sales, invoices, or card transactions.
Frequently asked questions
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