Sometimes businesses may face a big gap between their actual revenue and their cashflow. This is most commonly caused by a delay in receiving payment for your services. The UK currently has around 5.6 million businesses within it and this issue is common in construction, transportation, retail, logistics and printing.
This is because their services are often paid for upon completion of a task. Construction for example can yield a very healthy profit once a job has been completed but until that day comes, the business’s finances may look a little lacklustre. The impact of the COVID-19 pandemic also hit the construction industry hard and is continuing to prolong the time it takes to complete jobs.
When this happens, getting a loan may prove a challenge as the banks may feel you won’t be able to pay back what you borrow when in reality you will once you complete the job at hand. With this in mind, you’ll want to use invoice financing to secure your loans. Here’s everything you need to know about it.
What is invoice financing?
Invoice financing is when you borrow based on the value of your invoices issued to your customers. It is used to show the banks how much your company is expected to take in, even if you don’t have that much in your account currently.
Utilising this method for securing a loan proves to the bank your future cash flow, therefore, instilling confidence in your business. They’ll be satisfied knowing that you can pay the money back at a time you both agree upon.
What can it be used for?
When you’re waiting to finish the job, you may be hit with fees that need paying before your expected income arrives. This could be done to combat late payments, pay unexpected bills as well as avoiding raising equity.
More than anything, invoice financing is a great way to give you confidence that your business will stay afloat, even when the going gets tough.
Am I eligible?
To qualify for this financing option you must be business to business with credit terms, have contractual debt included and be a registered business in England or Wales.
If you cover these then you can start your application today and start to look positively into a future that contains success.
