Invoice finance is a form of short-term borrowing that allows you to access funds tied up in your unpaid invoices by receiving a percentage of their value in advance of their payment date. It can help you improve your cash flow, manage your sales ledger and credit control, and take advantage of growth opportunities.
However, despite its benefits, invoice finance is often misunderstood or misrepresented by some people who are not familiar with how it works or who have heard some negative stories about it.
Myth #1: Invoice finance is only for businesses in financial trouble
One of the most common myths about invoice finance is that it is only for businesses that are struggling financially or that have poor credit ratings. This is not true. Invoice finance is suitable for any business that sells goods or services on credit terms and has a gap between issuing invoices and receiving payments. Invoice finance can help you bridge that gap and improve your cash flow, regardless of your financial situation or credit history.
In fact, invoice finance can help you avoid financial trouble by providing you with a steady source of working capital that you can use to pay your expenses, invest in your business, or take on new projects. Invoice finance can also help you improve your credit rating by enabling you to pay your suppliers and creditors on time and avoid late payment fees or penalties.
Myth #2: Invoice finance is expensive and complicated
Another common myth about invoice finance is that it is expensive and complicated to set up and use. This is also not true. Invoice finance is a flexible and convenient way to finance your business, and it can be cheaper and easier than other forms of borrowing, such as overdrafts or loans.
Invoice finance is based on the value of your invoices, not on your assets or collateral. This means that you can access more funds as your sales grow, without having to provide additional security or undergo lengthy credit checks. Invoice finance also has lower interest rates and fees than other forms of borrowing, as you only pay for the funds you use, not for the whole invoice value.
Invoice finance is also simple and straightforward to set up and use. You can choose from different types of invoice finance, such as selective invoice finance, invoice factoring, and invoice discounting, depending on your needs and preferences. You can also choose the level of involvement and control you want over your invoices and customers. For example, with invoice factoring, the invoice finance provider will take over the responsibility of collecting payments from your customers and managing your sales ledger, while with invoice discounting, you will retain control over these functions and deal with your customers directly.
Myth #3: Invoice finance will damage your relationship with your customers
A third common myth about invoice finance is that it will damage your relationship with your customers or make them think less of your business. This is also not true. Invoice finance is a common and widely accepted form of business finance, and it does not affect your reputation or credibility in any way.
In fact, invoice finance can enhance your relationship with your customers by allowing you to offer them better terms and service, as you will have more cash available to fulfil their orders, meet their demands, and handle any issues or complaints. Invoice finance can also help you attract new customers by enabling you to take on larger or more complex contracts that you might otherwise not be able to handle.
Moreover, invoice finance does not have to be disclosed to your customers, unless you want to or have to. With invoice factoring, your customers will know that you are using invoice finance, as they will receive invoices and statements from the invoice finance provider and pay them directly. However, this does not mean that they will think less of your business or that you will lose contact with them. The invoice finance provider will act as an extension of your business and treat your customers with respect and professionalism, while you will still maintain regular communication and interaction with them.
With invoice discounting, your customers will not know that you are using invoice finance, as you will continue to issue invoices and collect payments from them as usual. You will have a confidential agreement with the invoice finance provider, who will not contact your customers or disclose any information about your arrangement.
Conclusion
Invoice finance is a powerful and effective way to finance your business, and it can help you overcome cash flow challenges, manage your sales ledger and credit control, and take advantage of growth opportunities. However, invoice finance is often misunderstood or misrepresented by some people who are not familiar with how it works or who have heard some negative stories about it.
In this blog post, we have debunked some of the common myths and misconceptions about invoice finance and shown you why it can be a great option for your business. We hope that this post has cleared up some of the confusion and doubts you might have had about invoice finance and encouraged you to give it a try.
If you are interested in learning more about invoice finance or finding out how it can benefit your business, please visit our website or contact us today. We are a leading invoice finance provider in the UK, and we offer flexible and tailored solutions to suit your needs and preferences. We would love to hear from you and help you achieve your business goals.
Free quote 