New financial products are developing rapidly thanks to the wave of innovation that technology has brought into the financial sector.
A large part of these developments are firms offering alternative finance solutions which are often adopted by small and medium enterprises (SMEs) as they offer flexibility and ease-of-use.
One form of alternative finance enjoyed by SMEs is Invoice Finance. In the following we will explain what invoice finance entails, how you know you need it and why it is especially useful for SMEs.
Invoice finance is a financial service offered to improve liquidity and short term cash flow. It allows firms to receive funds against their outstanding invoices so that the cash enters the business before the invoice itself is paid.
How does it work?
SMEs often struggle with longer payment terms imposed by their suppliers as they delay other operations. Therefore, it is often useful for them to receive funds earlier through the use of invoice finance. It allows their normal operations to continue without the delay of having to wait for an invoice to be paid 30 or more days after the delivery of goods or services.
The two basic questions to answer are:
If you responded to both questions with yes, then you should consider using invoice finance to improve your business’ cash flow.
Young companies in particular struggle with having enough cash available to pay their suppliers on time. In these situations, invoice finance can help to free up cash to pay suppliers earlier.
After access to finance, liquidity and cash flow are the most important issues for SMEs, and many are unaware of the options available to help improve these areas of businesses.
Nowadays, fintech platforms exist that allow quick and easy access to short term finance and it is essential for SMEs to become more aware of the opportunities available to them.
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