How much do you know about invoice finance? It has been our experience that many small business owners have never even heard of it, let alone understand it. That’s fine except for the fact that there are a lot of myths about invoice finance floating around out there. These myths unnecessarily dissuade businesses from taking advantage of one of the most trusted forms of business financing ever developed.
Invoice finance is nothing new. Indeed, it has been around for centuries. It involves using unpaid invoices as a tool for raising cash. The process is pretty straightforward: a company sells one or more outstanding invoices to a factoring company. The factoring company pays a certain amount upfront and the rest when the invoices are paid. A fee is charged for the service.
Also known as debt factoring and invoice factoring, invoice finance is a proven practice with plenty of history behind it. As for the myths surrounding the practice, do not believe them. Learn the truth about invoice finance instead.
It’s Not a Sign of Financial Desperation
One of the chief myths of invoice finance is that making use of it is a sign of financial desperation. As the myth goes, companies only turn to factoring when they are out of cash and have no other way to raise it. Well, we can guarantee you that this is not the case. We serve plenty of clients whose finances are sound. They have their reasons for factoring, none of which involve desperation.
Along those same lines, considering invoice finance isn’t a sign that your company is in trouble. If that were the case, we would be forced to look at small business loans, equity investments, and other funding strategies the same way. Yet common sense tells us that even the healthiest companies borrow from time to time. It is part of doing business.
It Doesn’t Have to Be Expensive
Another common invoice finance myth is that it is expensive. It can be, if you don’t choose a factoring company wisely, but it doesn’t have to be. Factoring companies are like any other type of business in the sense that they compete with one another. You are going to find some that are more expensive than others. But like anything else, you shop around until you find a company you can work with and whose rate you find acceptable.
It Doesn’t Require Surrendering Control
Invoice finance is widely misunderstood from the perspective of maintaining control over one’s customer relationships. It is commonly believed that utilizing invoice finance requires surrendering control. That’s not the case. When a company sells one or more invoices to a factoring partner, the company is simply selling an asset. There is no surrender of control over the customer relationship. That relationship remains firmly in the hands of the company.
Simply put, utilizing invoice finance does not change how you control or operate your business. Everything remains the same except for the fact that you are getting paid on invoices you have sold to a factoring partner. That’s it. You are not turning your business over to a factoring company.
A Great Solution for Some Needs
The truth is that invoice finance is a great solution for some financial needs. It’s obviously not the best solution for every scenario. But when it is right, invoice finance can go a long way toward helping a company reach is financial goals.
If you would like to know more about invoice finance through Thales Financial, reach out to us. We would be more than happy to explain how our services can benefit your company.