Small business owners encounter dozens of different issues during the first year of their entrepreneurial career. Not having enough cash to pay their bills and obligations is one of the most common problems. Since that position can ruin your small business, you have to learn more about different mechanisms you can use to ensure you have assets to keep the business rolling. Invoice financing is an utterly effective, yet affordable way to get enough money for your business projects.
Two sides of invoicing
This kind of financing is based on loans. Since in every loan there are at least two interested parties, it’s vital to learn the basics of both of them and their responsibilities. On the one hand, you have the accounts payable. This is the money you owe to other business entities. On the other, there are accounts receivable. This term comprises all the money that other companies have to pay to your business. Why are these figures important? The invoice company that will lend you money will be more than interested in the receivable and payable sums. Actually, this ratio will be the key factor in deciding whether or not you’re eligible for such a loan. So, it’s recommendable that you don’t owe anything to anyone. Naturally, that’s impossible if the others haven’t paid their debts to you. This is why getting an invoice provider as soon as possible is crucial, so as not to end up in a vicious circle of debts.
The advent of invoicing
When ordinary citizens and large investors lose their faith in institutions, it gives way to alternative solutions. The collapse of the market in 2008 and the crisis that followed changed the way people perceive banks and other established institutions. Indeed, if bank officials and directors bet on their clients’ savings and investments once, there’s no guarantee that they won’t perform such a scam again. And this is why people now trust invoice funding strategies. Firstly, such companies enable them to overcome difficult periods and keep their businesses alive with low interest rates. Secondly, the lending procedures are much simpler than the ones in banks. Of course, the aforementioned payables and receivables are thoroughly analyzed, but your borrowing will be granted fast if the figures are positive.
Finally, the existence of such new ways of financing SMBs increases the speed at which business deals are closed, breathing new life into the stalling economy.
Future business perspectives
Invoicing undoubtedly has a bright future. Its key advantage is that it allows businesses to accelerate the process of lending and borrowing money. Also, the other side can’t find out you’re using invoice financing. However, if a reliable, long-time business partner is struggling to overcome a bad period, you should tell them what you’re going to do. That way, you’ll get assets for your future work, but still treat your old companion in a fair way.
Finally, the best of it all, when it comes to this sort of business financing, is that your revenues and the future income aren’t under pressure. On the contrary, it’s the assets you’ve already earned that guarantee the invoice loan. The lender will get back what they’ve given you directly from your debtor, which is a win-win situation for your business.
If you want to protect your business from debtors, you should find a personal invoicing partner the moment you found your enterprise. In a long-term perspective, such an entity will keep your cash flow intact in case of coming across non-paying debtors. That way your business will be able to flourish and grow no matter what business associates you have to deal with on your road to success.
Dan Radak is a marketing professional with ten years of experience. He is a coauthor on several websites and regular contributor to BizzMark Blog. Currently, he is working with a number of companies in the field of digital marketing, closely collaborating with a couple of e-commerce companies.