Invoice Discounting Solution to your Money Troubles
Do you have money troubles? Perhaps your business is not being paid by your clients on time? Clients try to obtain the best terms for themselves and when they start suffering from money issues they can fail to pay on time. They may eventually pay up, but you are in a difficult situation when you are unable to find the funds you require. Bank loans are an option to get more cash into your company, but this solution has become harder in recent years. Banks are no longer lending to individuals who look risky and it also takes a few months for any loan to be processed.
To avoid this issue, you can find a simple solution in invoice finance. A finance company like this offers you money within a week or two. Typically, the factor will examine your clients’ credit history to determine the risk of nonpayment. Once the background information has been examined the factor will decide on whether to lend you money or not. If they decide to lend you money the company will set up an account for you. It is one of the reasons it can take a week or two because they need to do the background and setup. However, after everything is set up it will take 24 to 48 hours for money to be transferred. From then on it will only take a day or two for funds to be sent to your account.
You are able to continue your business without an interruption in cash flow, as long as you use these finance products. There are two types of finance from these companies: factoring and invoice discounting. For this article we will concentrate on discounting over the first option.
Discounting allows you to keep your ledger in your control. You will borrow against the outstanding invoices in the ledger, but you don’t actually sell them to the finance company. You still do the legwork in keeping the ledger up to date and calling to collect the funds from late payers. The difference is that you have money coming in while you are waiting for payment. Once the money is paid by the client you will make a payment to the finance company. There is interest involved in this process and you usually receive 85% of the invoice at the most rather than the whole invoice amount to ensure you can pay the interest.