Awesome! You are a start-up business and you’ve just won a supply contract from a large company.
If you manage the relationship correctly, you could gain a well-known brand as a partner. More importantly, these partners have the potential of becoming great repeat customers.
However, winning a contract from a large business can often turn out to be a major cash flow challenge.
Why? Because payment terms always seem to be in their favour.
Most large companies often insist that vendors provide credit terms. These net payment terms give them up to 60 days, sometimes even 90 days to pay invoices.
Keep in mind that your company needs to spend money to service clients. You will need to pay salaries, rent, subcontractors, vendors and many other operating costs for up to 60 days before you see any payback.
That can be a one-way slippery slope to losing track of your cash flow and going under.
How can a new business meet the demand and establish itself when it’s often waiting months for the crucial cash flow?
Invoice finance can help many new Australian businesses through the most challenging phase of their existence by using money they have already earned but is temporarily tied up in unpaid invoices.
But The Market Invoice managing director Angus Sedgwick said care should be taken to select debtor finance that has flexibility.
“Small business finance can be vastly improved and streamlined using debtor finance because it is far more flexible than a bank loan. This flexibility allows SMEs to manage their cashflow by selecting which invoices, which debtor and when they would like to raise working capital,” Sedgwick said.
“With The Invoice Market, there are no lock-in contracts or debtor exposure issues.”
But what do large companies think of their suppliers sourcing short-term invoice finance?
A decade ago, large companies rarely entertained the idea of assisting with an invoice re-assignment. Today, it’s becoming commonplace.
Large corporations know they cannot succeed without a strong and reliable supply chain.
“Remember, large companies have a many different small business suppliers working with them. They want them to have good cash flow so they can have access to good supply partners,” Angus said.
The Invoice Market has crafted a niche out of businesses that need short-term cash flow but do not want to sell all their invoices for a fixed duration.
That’s why The Invoice Market is a more flexible and in many cases better suited product for SME’s than what the banks and other invoice funding providers offer.
“I’d like to think ourselves as incubators for small and medium enterprises. We can offer short-term support when a business is in its infancy.
“They are not going to stay with us forever. And we understand that.”
“The Invoice Market will consider invoice funding for start-up ventures, SME’s that are more newly established, maybe not yet profitable, running a tax debt payment plan or other issues that would immediately make them unable to meet the lending criteria of the banks.”
“Or they are maybe businesses that would meet the bank approval criteria but do not want to be locked into a 12 month whole of turnover facility.”