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How Invoice Factoring Can Help SMEs Develop Global Operations

How Invoice Factoring Can Help SMEs Develop Global Operations

Competing in the modern business world requires a willingness to develop cross-border markets. Whether that means staying on the continent or developing overseas operations, going global costs money. It can be difficult for small- and medium-sized enterprises (SMEs) to get the ball rolling without a decent amount of readily available capital. That is where invoice factoring can help.

Invoice factoring is a form of financing that doesn’t involve traditional lenders or government-backed grant programs. In fact, the practice is also known as invoice finance and debt factoring. It is a way to raise cash by leveraging a company’s existing receivables.

Funding Global Expansion

One of the big challenges of global expansion is tying up cash. There is that period of time between launching into new markets and generating consistent revenues. Regardless of how long it takes, a company still needs sufficient cash flow to manage domestic operations. Balancing cash flow across both domestic and international operations isn’t always straightforward.

Invoice factoring makes the job a bit easier by giving companies quick access to cash. SMEs can convert just enough invoices to meet their cash needs at any point in time. This provides a steady flow of cash to cover expansion needs as they pop up. At the same time, the company is not beholden to a small business loan and its monthly payments.

Converting Invoices to Working Capital

For some SMEs looking to go global, consistent cash flow is not an issue for domestic operations. The bigger challenge is coming up with the working capital to actually get global operations off the ground. Invoice financing works equally well for this sort of thing.

Companies can leverage invoices with a larger monetary value to raise the necessary capital. Said capital can be invested in global expansion even while domestic operations continue as normal. The two operations are kept separate, from a financing standpoint, until the global operations begin generating revenues.

Working capital is especially important when global expansion requires:

  • investing in supplies and equipment
  • leasing business space
  • purchasing raw materials
  • investing in advanced marketing.

All the expenses of launching into a new market generally need to be paid upfront. That means a hefty amount of working capital that must be supplied through the company’s current savings, financed through traditional lenders, or obtained from another source – like invoice factoring.

Self-Regulated Credit Control

An added benefit of utilizing invoice factoring to provide cash flow or working capital is the ability to self-regulate one’s credit. Companies can finance only what they need at any given time. Not having to take on expensive business loans makes for easier credit management.

Meanwhile, invoice finance eliminates the need to collect on those outstanding invoices sold to the factoring company. The company is not so far extended because it receives payment for those invoices. They are free to transition from creditor to business investor.

Speed Can Be a Critical Factor

Of course, the speed at which a company is able to move can be an important factor in developing global markets. Note that global expansion rarely happens in a bubble. When one company decides to do it, others jump on board. It often turns out that the company able to move the fastest gets the edge.

Once again, invoice factoring fits the bill. Converting invoices into cash is a relatively quick and seamless process that doesn’t require a ton of paperwork and months of processing. invoice factoring can help SMEs get cash quickly. They can move quickly as well. Working with an invoice factoring company provides the resources necessary to move forward with global expansion.