The latest reports from the financial industry are confirming what many of us have been thinking – that traditional business financing is out, and alternative business loans are in. Along with peer-to-peer lending, invoice financing is proving to be one of the most popular products among small to medium enterprises, with some invoice financing firms confirming growths of up to 22 percent in recent years. Members of the NACFB have stated that applications for traditional business loans dropped significantly between 2007 and 2010, when enquiries relating to invoice financing doubled. So what’s invoice financing all about, and why could it work for your business?
The beauty of invoice financing is that it’s actually very simple and straightforward. If you’ve provided a fee-based product or service to a client and created an invoice, you can ‘sell’ this invoice to a business loan provider specialising in alternative business finance. The lender will agree to pay a percentage of the invoice to you – some firms offer as much as 90 percent – offering you almost instant access to cash. The client repays 100 percent of the invoice cost to the lender. The Nesta innovation charity reports that, on average, businesses raise £56,000 through invoice financing.
For businesses requiring fast access to cash, invoice financing is a much better solution than a traditional bank loan. While these traditional loans can take weeks – even months – to secure, the average invoice financing agreement is arranged within 8 hours, and in most cases in under 24 hours.
One of the main reasons that businesses are turning to alternative business finance options is because it’s becoming seemingly harder to secure a business loan from a high street bank as the economy remains in a recovery period. 33 percent of businesses think they would be turned down by a traditional provider, and are turning to alternative lending to minimise rejection and hassle.
As long as you have provided an arranged product or service, have acted in accordance with rules and regulations, and have a valid purchase order or confirmation for the purchase, invoice financing is relatively low risk. As long as the client pays their invoice in full, there’s nothing to worry about.
Invoice financing grew by 174 percent between 2012 and 2014, and this year expertsexpert the alternative business finance industry to be worth more than 4.4 billion based on recent trends. To find out if invoice financing could be a good alternative to a traditional business loan for you, compare business finance offers online and see if your company could enjoy the benefits of invoice financing. Compareyourbusinesscosts.com features a handy online tool that enables you to quickly and easily compare current deals from major invoice financing providers in the UK- give it a try!