Invoice Financing for Newbies

You’ve just launched your business. After a rocky start, things are picking up and the clients are rolling in. Sales tripled between the second and third quarters and all your dreams are coming true except for one small issue: no one has paid their bills and you’re dead broke. This is an unfortunately common scenario in the business world, as offering a service rarely leads to immediate payment. The solutions are either to give up, take out a small business loan, or turn to invoice financing to put money (that you’ve already made) back into your business.

Better Than a Bank Loan

You may have launched your business by taking out a small business loan, and perhaps that’s one of the bills you’re late in paying because your customers haven’t settled up yet. While standard loans work well in some situations, there are far better alternatives when you just need to boost your cash flow. While term loans take time to process, often require collateral and aren’t all that easy to come by, invoice financing works as an advance on money you’re already owed for services you’ve already rendered. A factoring company will give you a portion of the outstanding balance, then go about collecting the payment. Once all the receivables are in you’re paid the rest of the invoice, minus the companies servicing fee.

This is better than a standard loan for several reasons, not the least of which is you getting your money in a timely manner. The whole purpose of securing funds through a third party is that you need capital to cover costs while waiting for accounts receivable. Invoice financing is designed to allow companies to maintain business as usual instead of being bled dry while waiting for cash to start flowing.

A Good Kind of Collateral 

Maybe you don’t have collateral to offer, or maybe the idea of using your house, car or company as a guarantee gives you pause. You aren’t the first business owner to feel this way. With invoice financing, you’re drawing against sales that have already been made. The lending company’s guarantee is the money you’re waiting to receive, so you don’t have to put any other assets on the line.

New businesses aren’t afforded a lot of chances to prove themselves. Don’t let unpaid invoices bring your company down when there are ways to avoid it. Let the money you’ve earned secure the money you need so you can get back to making the money you want.