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Invoice finance – also known as cash flow finance or debtor funding – allows businesses to access the money tied up in their accounts receivable. It can provide a significant boost to working capital and hugely strengthen a company’s cash flow situation, which in turn helps finance growth while reducing the associated problems – but can it be enough to finance major purchases?
Yes it can! For B2B operators with a substantial order book, cash flow finance can bring forward large amounts of money they are owed. When used judiciously and with the timing benefit afforded by a flexible provider, that can be enough to pay for a factory upgrade, an investment in extra equipment, or a significant increase in supplies.
What’s more, invoice financing can be used in conjunction with other forms of business funding to raise even more money. Flexible modern fintech operators like OptiPay can help you to build a bespoke financing package that encompasses other cost-effective measures such as trade finance and supply chain finance.
Because invoice finance is ’off-balance sheet’, it can also be used in conjunction with traditional business loans or mezzanine finance packages, with the extra cash available helping to secure a better deal or to persuade a lender to come on board.
Using OptiPay’s flexible invoice discounting, a business that has registered with us can typically get its invoices paid within 48 hours of issuing them. The total amount that can be raised at short notice simply depends on the backlog of invoices the company has.
Typical B2B terms see invoices paid within 30, 60 or 90 days of receipt. Under the middle scenario, a business can effectively access two months’ worth of revenues at once. For a manufacturer, warehousing operation or construction business, that can mean millions of dollars.
Naturally, a business setting up invoice financing will have to consider that it may then face a cash flow gap going forward, but of course further invoices can be submitted to cover this. A flexible provider is ideal in this situation, because the business owner or chief financial officer can simply offer invoices for discounting as the needs arise, and pay nothing when extra funds aren’t required.
Under most forms of invoice discounting, the business accessing the funding is not going into debt: the transaction is more akin to selling an asset, or offering an cash-on-delivery discount. This means that it is still free to take out a loan.
If, for example, the cash flow advance is enough to fund half of a planned business investment, the loan required will therefore be much smaller and, with the business matching the lender’s funds, much less risky for the finance provider.
Invoice discounting can also be paired with supply chain finance to provide a highly effective way of funding a growing business’ need to make large purchases from its suppliers.
Supply chain finance is like invoice discounting for the buyer: a business arranges for the financier to pay the invoices it receives early, and then settles up after the standard time – say 60 days later. The cost of this arrangement can often be met by the early payment discounts that are negotiated.
Under a scenario where a business is investing in a growth plan over a period of time, a combination of invoice discounting and supply chain finance can often cover all its needs for a very modest cost – all while significantly strengthening the cash flow situation of all companies in the supply chain.
This is a truly smart way of financing ambitious business growth plans involving multiple purchases. Tim. now has the ability to arrange these nimble finance plans, acting as a one-stop shop where you have total control. If you trade with other businesses and need to fund purchases, get in touch with us now to find out just how smooth and cost effective this system can be.
“Get tomorrow’s cash flow today.”
This is Paul, he is one of the directors of UVS, a labour-hire provider to the construction industry. Here’s what he has to say about how OptiPay was able to help his business grow and succeed. Contact an OptiPay expert today to see how we can help you.
OptiPay offers several different funding solutions and services, one or more of which charges no interest and has no long lock in contract period, called the Fully Flexible funding option. Conditions, fees and charges apply to some of the Services provided, which may change, or we may introduce new ones in the future. Full details for all funding options (Services) including any fees and charges which may apply, is available on request. Lending criteria apply to approval of credit products. This information does not take your personal objectives, circumstances or needs into account. Consider its appropriateness to these factors before acting on it. Read the funding agreements provided, for your selected funding solution (product/service), including all the Terms and Conditions contained in agreements provided, before proceeding. *T&Cs: Minimum 12-month invoice funding contract with OptiPay. Direct clients only, offer doesn’t apply to broker introduced clients. All standard credit terms and conditions apply including credit assessment. Not applicable to existing clients.