If you own and operate a B2B business, chances are that you have faced cash flow problems in the past. Businesses can suffer tremendously when they face cash flow problems. Of course, you might have piles and piles of outstanding invoices, but what good are they when you don´t have liquid cash to meet your operational costs? How do you pay your employees during such times? And, in worst cases, if have to pay taxes, how do you go about wriggling yourself out of that situation? How are you supposed to grow your business when you don´t even have a single cent to invest in marketing and advertising?
What can be done under such circumstances?
Fortunately, it is possible for you to turn your outstanding invoices into immediate liquid cash through invoice funding. Invoice funding, also popularly referred to as invoice factoring, is a process that allows you to sell your invoices for immediate cash. Invoice funding is a common funding solution businesses use to improve their cash flow.
Factoring agencies and companies facilitate this process and they usually take factoring fees for their services. Basically, the factoring agency purchases your invoices for a discounted amount and then collects the amount from the debtor. The agency gives you around up to 90% of the overall value of your invoices. There are primarily three different parties involved in the factoring process—the business that sells the invoices, the factoring agency that buys the invoices, and the debtor who owes money to the owner of the invoices.
However, there are several factors you must pay attention to before getting into a factoring relationship with an agency. It is important for you to understand the terms of the contract and the fee structure of the factoring agency.
How can you increase your marketing budget by invoice funding?
Contrary to popular opinion, invoice funding is not a form of loan. Invoice funding doesn’t add debt to your clean balance sheet. If you hate the idea of taking out business loans, you will love the benefits of invoice funding. You´d probably have to wait for weeks or months to get your loan approved; however, invoice funding has fast approval time, giving you access to funds in as little as 48 hours.
When you get a bank loan, you might be instructed to spend the money on equipment or other assets. However, when you receive money from a factoring agency, you are free to spend the money as you see fit. The capital gives you the opportunity to invest in your business and expand. You can also use the cash to acquire new technology, upgrade your office space, and even hire temporary employees during busy periods of the year. But, most importantly, you will have the money to invest in your marketing campaigns.
It is essential to keep ahead of changing times. The world of business keeps evolving with each passing year. Therefore, in order stay ahead of the curve, it is necessary for you to keep up with trends. We live in a digital world at the moment and there are endless opportunities to promote your business online. However, in order to maintain a strong online presence, it is necessary for a business to invest in marketing and advertising campaigns. Like everything else, marketing campaigns, too, change frequently, and the massive influx of technology has made marketing campaigns even more flexible.
People no longer respond to the traditional forms of marketing. Most people are only attracted to the digital platforms such as tablets and smartphones. It is essential for a business to have a mobile site. However, even designing a mobile site requires money. And, preparing a marketing campaign for mobile devices require investments too. Therefore, if you want your business to be in a market-leading position, it is imperative for you to invest in a marketing campaign.
If your business is currently struggling with cash flow problems, the smart way to acquire working capital is undoubtedly through invoice funding. Invoice funding gives you the funds required to achieve your marketing goals.
Additional advantages of invoice funding
When you sell your invoices to a factoring agency, not only do you receive immediate cash, you also transfer the responsibilities of collecting the payments to your agency. You will not have to deal with strenuous, time-consuming paperwork, allowing you to maintain your focus on your core business. Invoice funding gives you the funds to make your payments on time, fulfill your tax obligations, and take advantage of early payment discounts.
Factoring agencies also provide extremely flexible programs. Therefore, you don´t have to worry about being compelled to commit to a long-term contract; you also don’t need to focus on the maximums and minimums. Basically, you are the one who is in charge and you get to decide the invoices you wish to factor.
Additionally, the factoring fees that the factoring agency charges you with also won´t burn a huge hole in your pocket; after all, the fees can be as low as 1.5%, and they vary according to the volume of invoices, sector, industry, and advance rates etc.
And, we have saved the best part for the last. Since factoring agencies only concentrate on the creditworthiness of your customers, you don´t need to have a sound financial history to factor your invoices. There´s no hassle in factoring your invoices as you can get your funds in as little as 48 hours.