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5 Signs Invoice Finance Is Your Best Option for Raising Cash

5 Signs Invoice Finance Is Your Best Option for Raising Cash

Companies in need of cash have options. One such option is invoice finance. Also known as invoice factoring, it is the practice of selling unpaid invoices to a factoring company like Thales Financial. Selling invoices gives a company instant access to the cash it needs.

It’s a given that invoice finance isn’t right for every company. And even among companies that benefit from it, it’s not right for every situation. That’s why it’s wise for companies to consider all other options before making a decision.

All of that said, here are five signs invoice finance is your best option for raising cash:

1. Your Needs Are Immediate

You may have immediate needs that cannot wait for bank loan approval. When banks are involved, it could take anywhere from 30 to 90 days to close. Maybe you don’t have that kind of time. If that is the case, rest assured that factoring companies can work much more quickly.

2. Your Needs Are Short-Term

Invoice finance could be your best option for raising cash if your financial needs are short-term. In other words, you are not looking for a revolving line of credit you can utilize for the next five years. You just need to raise some quick cash to invest in a new piece of equipment, pay an unexpected bill, etc.

For the record, the ability to meet short-term financing needs is one of the hallmarks of invoice finance. You are taking advantage of money that is already owed to you but just hasn’t been paid yet.

3. Your Needs Are Reasonable

Next up, invoice finance is a good bet if your financial needs are reasonable. What do we mean by reasonable? Maybe you need a few thousand dollars to make some capital improvements. That is doable. If you are looking for $10 million to build a new manufacturing plant on the other side of town, invoice finance is not going to be your best choice.

We hate to try to offer a certain dollar amount that would be considered reasonable. Determining what would be reasonable for you would require consultations between you, your accountant, and a factoring company.

4. Your Debtors Are Mostly Reliable

One of the keys to successful invoice finance is selling invoices you are confident the factoring company can collect. You are looking to sell invoices belonging to reliable debtors the factoring company isn’t going to have to chase down. If the only invoices you have to offer are from deadbeat customers, invoice finance probably isn’t going to work for you.

As a side note, do not assume that invoice finance is a way to offload bad debts. If you have unpaid invoices from debtors that are doing everything that they can to avoid payment, you are better off looking for a collection agency.

5. Financing Will Improve Your Cash Flow

The last sign that invoice finance might be your best option is improved cash flow as a result of selling a few invoices. For a lot of our customers, that’s what it’s all about. They don’t need regular access to unending credit. Rather, they just need to have more consistent cash flow at particular times of the year. Think seasonal businesses as an example.

As previously stated, invoice finance isn’t right for every company or every financial scenario. But when it is the best option, it offers a form of financing unparalleled by bank loans, hard money, credit cards, etc. If you believe invoice finance is right for you, contact us at your earliest convenience. Let us talk about your financial goals and how we might help you reach them.