Make Invoice Finance a valuable tool

With the new year underway, business owners will be putting their plans into action hoping that 2024 will turn the corner on what has been a challenging few years.  Figures from a recent SME Business Monitor* encouragingly revealed that 45% of SMEs in Q3 2023 have aspirations of growth – an increase from 40% in Q4 2022 - with 60% of them in a good mood about their businesses. 

We are very much aware that critical to growth plans is having the resources to make them happen.  Having the financial flexibility to deliver these plans can make the difference between them becoming a reality or not happening at all.  What is interesting is that latest figures show that 50% of businesses are now using external finance.  Could the “Permanent non- borrower” culture of recent years have been sidelined, as firms recognise the need to ensure they have sufficient funding to counteract economic challenges whilst also having funds to invest in adapting their business to the current market?  We saw the demand for Covid loans which many firms are still repaying but perhaps it has reignited firms’ appetite to borrow money once again to support business growth.

That said, businesses need to explore the financial options open to them rather than focussing on the traditional overdraft or loan.  I believe that Invoice finance can be a valuable financial tool for businesses in 2024 as they seek to capitalise on an improving but still uncertain economy.  Invoice Finance can deliver many benefits to a business looking to grow:

Improved Cash Flow - Invoice finance enables firms to access the funds tied up in unpaid invoices, providing an upfront injection of cash and an ongoing supply of cashflow to support day-to-day operations, paying suppliers, and seizing growth opportunities.

Ongoing Working Capital - By converting outstanding invoices into immediate cash, businesses can improve their working capital position. This is particularly important in industries where payment terms are extended or where there are seasonal fluctuations in cash flow.

Flexibility and Scalability - Invoice finance is a flexible solution that can be scaled up or down based on business needs. Whether a company is facing a short-term cash crunch or planning for expansion, Invoice Finance can adapt to varying financial requirements.

Reduced Dependency on Traditional Loans - As an alternative financing option, invoice finance reduces reliance on traditional bank loans, providing businesses with a more diverse and adaptable funding mix. This can be especially beneficial during economic uncertainties or when traditional financing options are constrained.

Credit Risk Mitigation - Invoice finance can include a debtor protection solution. This helps businesses safeguard their cash flow and protect against bad debt, allowing them to focus on core operations.

Adaptation to Market Changes - In a dynamic business environment, having access to quick and flexible financing options like Invoice Finance enables companies to adapt swiftly to market changes, capitalize on opportunities, and navigate economic uncertainties more effectively.

Increased time to focus on business – Invoice Finance includes an optional outsourced invoice collection and management solution which allows businesses to concentrate on their core competencies and growth strategies, leaving the collection and credit control tasks to the invoice financier.

Support for Small and Medium-sized Enterprises (SMEs) - SMEs, in particular, can benefit from invoice finance, as they may face challenges in accessing traditional financing options. It provides them with a reliable source of working capital without the need for extensive collateral.

Funding for acquisitions or MBO/MBI’s – Invoice Finance can also support larger firms looking to expand through acquisition or management teams looking to conduct an MBO/MBI.  By releasing funds tied up in unpaid invoices, the firm can access an injection of funds to support the acquisition cost whilst also providing an ongoing supply of funds to help support ongoing growth.

In conclusion, Invoice Finance offers businesses a versatile and efficient means of managing cash flow, improving working capital, and adapting to the ever-changing landscape of the business world in 2024.  

*BD BVRC