One of the most important factors affecting your success as a small to medium-sized business is your ability to accelerate your growth through consistent cash flow. Keeping all the cogs of your business turning – from purchase orders and stock deliveries to high-level operational and management processes – enables it to thrive and grow.
Unfortunately, this delicate balance of growth and cash flow can easily be disrupted when it comes time to invoice your buyers. In an ideal world, invoice payouts would be instant. In reality, they can take anywhere from 30 to 60 days, requiring you to wait for the capital you need, impacting your efficiency and costing you opportunities.
This can quickly add up when you’re waiting on multiple invoice payments. Your working cash flow is currently paused but that doesn’t mean your business expenses stop. You still have staff and employee salaries to pay, monthly overheads to cover as well as new clients approaching you with purchase order requests that you don’t have the capital to fulfil.
In short, delayed invoice payments put a strain on your cash flow, impacting your efficiency, productivity and, in the long run, your profitability. Invoice discounting can solve your cash flow challenges quickly and discreetly, allowing you to run your business without impacting your existing buyer relationships.
What is Invoice Discounting?
Invoice discounting is a form of financing that allows businesses to gain instant access to funds tied up in their buyer invoices. It allows you to get the working capital you need without having to wait until your buyer pays you on the invoice you have sent them.
Essentially, it stops that cash flow “dam” from forming as a result of you having to wait for your invoice payments, allowing you to continue running and growing your business without delays or interruptions.
How Does it Work?
As a business, you provide stock or products or render a service that you then invoice your buyer for. Your buyer (known as the debtor) will typically pay the invoice in 30 to 60 days (or depending on the agreement you have). To avoid having to wait that long to get working capital, you’ll then approach an accredited lender who offers invoice discounting as a service.
The lender will pay you a portion of the invoice amount (usually 70% to 80% of the total amount) upfront. Once the debtor pays the invoice amount, the lender will then pay you the outstanding amount less interest and other fees charged.
Invoice discounting is a secure and simple way to get the funds your business needs without having to wait for it to be released.
The Benefits of Invoice Discounting
Aside from getting the working capital you need when you need it, there are a variety of benefits for SMEs that use invoice discounting, including:
- Simplicity and ease – invoice discounting is a secure yet simple way to access the funds you need and is a popular alternative for SMEs who don’t qualify for traditional financing like bank loans and overdrafts.
- Application -unlike other forms of financing which might have strict regulations on where and how the capital can be used, the funds you receive from invoice financing can be used anywhere in your business, allowing you to invest it where it’s most needed, whether that’s covering overhead expenses or financing new projects or processes.
- Time – invoice discounting is a faster end-to-end process compared to the red tape of applying for and waiting for a loan approval from a bank or credit provider. Turnaround times for invoice financing are between 24 to 48 hours, which can make all the difference when it comes to being able to pay salaries or meet last-minute PO requests.
- Debtor risk assessment – invoice discounting focuses on assessing the debtor’s risk, meaning that the lender reviews and uses the debtor’s balance sheet to secure you better rates.
- Discretion – gaining capital through invoice discounting removes any underlying pressure of payments needing to be settled quickly. Your buyers don’t even need to know you are working with a lender, allowing you to continue your buyer partnerships as normal.
- Growth acceleration – having the cash flow you need on hand allows you to grow and scale your business by allowing you to pursue more contracts and take on larger purchase orders. This improves your incoming cash flow and accelerates your business’s growth rate.
Get the Invoice Discounting You Need With Sourcefin
At Sourcefin, we provide secure, supportive financing through invoice discounting to businesses in need. We understand time is of the essence which is why we keep our processes quick and efficient with a focus on results.
Unlike other providers who base their deals on in-depth assessments of both clients and debtors, often turning away clients as a result, Sourcefin bases its deals on the invoice and the debtor.
Through our state-of-the-art algorithms and machine learning capabilities we can easily perform high-level client reviews while conducting in-depth end-buyer assessments.
We also don’t take control of any property or assets – your business remains entirely in your hands.
Whether it’s government or smaller, private end-buyers, we offer invoice discounting across the board.
We specialise in providing invoice discounting to government end-buyers. We can close government deals at a faster, more efficient rate compared to other financiers.
We’re capable of taking on larger invoice advances of R250,000 or more that we can grant quickly and easily.
If you require invoice discounting for your business operations, or simply want to learn more about Sourcefin can offer you, contact us and we’ll be in touch.
