Your business is a living, breathing organism. To keep it running smoothly you need to feed it a steady flow of cash. Sometimes this doesn’t go according to plan, with typical things like payment delays. So looking for innovative ways to solve short-term cash flow issues and help your business grow beyond the organic growth process, can be a wise move.
A popular approach for businesses to access fast cash is Spot Finance, or Invoice Factoring. Many people aren’t aware of this easy way to access funds, without waiting for the cash to flow in for services rendered. Even better, you don’t have to experience a protracted loan process with a never-ending pile of forms to complete and a multitude of hoops to jump through.
Spot Finance to the rescue
Invoice finance works for any business that invoices its customers. This type of funding is a great way for businesses to fund cash flow quickly by retailing an invoice or batch of invoices at a concession to a spot factoring company.
Here’s a quick overview of how it works:
- You assign your invoice(s) to your spot finance company, once you’ve agreed on rates
- Your spot finance company verifies the invoice(s) and advances an agreed percentage of the value to you upfront
- When the invoice is due for payment, your customer pays the full amount to your spot finance company, who deduct their fees and return the balance owing to you.
You get to turn unpaid invoices into immediate cash flow and keep everyone happy. But the benefits don’t stop there.
The benefits of Spot Finance
The biggest benefit of spot finance is you get immediate access to funds when you need them. You sell your unpaid invoice to a finance company who specialises in business finance, and they advance you a percentage of that invoice value (usually between 80% and 90%). So funds that would otherwise be tied up in your invoice(s) are unlocked immediately, so that your business can continue to do what it does best, without stressing about receiving payments on time and other cash flow issues. When the invoice is due, your customer pays the finance company who deduct their fee and pay the remainder of the balance owing to you.
When spot financing larger invoices, or invoice batches, your business can receive a hefty cash injection, so you can quickly pay your suppliers, staff and other ongoing expenses, and help fund growth. Expert invoice finance company, Fifo Capital, for instance, factors invoices between $5,000 and $250,000.
Small to medium business cash flow depends on prompt payment. But according to online accounting software firm, Xero, only one in nine invoices is paid on time. Even New Zealand’s dairy giant, Fonterra, asked their suppliers to wait between 61 days and up to three months after the end of each month for their invoices to be paid. When faced with these kinds of terms, the decision to enjoy spot finance becomes a no-brainer.
More good reasons to enjoy invoice factoring:
- Invoice finance is quick to set up and start receiving funds
- With spot financing, you’re not locked into long-term agreements. Your facilities can come and go as you please
- You can decide to finance just one, or many invoices at a time.
- You don’t need to hand over your entire business to a lender just to get access to the cash you’ve earned
- When your customer pays their invoice that debt is cleared
- Your finance agreement only lasts until your customer pays your invoice
- You can use this type of finance in conjunction with your current banking and finance facilities
- You don’t need to provide property as security for your funds. That means your house, car, limbs and better half are safe
- As the name suggests, gaining access to funds is practically on the spot.
The key to invoice factoring, or Spot Finance, is to engage a reputable financial specialist like Fifo Capital, who is specifically set up to handle short-term finance.
After you’ve set up your relationship with your business financier, you can unlock the cash in your invoices in just 4-hours in most cases.
When you choose the right finance partner, they ensure you maintain a strong relationship with your customers. Having a third party deal with all the payment side of business can take the pressure off both sides, allowing for smoother client relations. Removing emotions around receiving payment can be healthy for both sides of the table. That’s why many businesses prefer to leave it to the experts.
If you are looking to turn unpaid invoices into immediate cash flow or other viable cash flow solutions for your small or medium sized business, you can count on Fifo Capital, your business cash flow experts in invoice finance and fast business loans.
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