Big corporates have been using invoice finance for decades. Modern SMEs can now revel in its benefits.
[eckosc_status_message title="SNAPSHOT" icon="fa-bolt" type="info" message="Invoice Finance is a widely accepted business financing tool that can be used if you invoice customers on credit terms. You can access funding from invoices today, rather than waiting 30,60 or 90 days for payments."]
What confuses business owners is that invoice finance can get mixed up in other forms of funding like invoice factoring and even invoice finance can take a few different forms depending on the lender you're speaking with. Banks generally only offer invoice financing to large businesses with turnover in excess of 5 million dollars, significant assets and showing profits.
Invoice Finance has evolved
[inlinetweet prefix="" tweeter="" suffix="@getwaddle"]Invoice Finance has gone through a significant evolutionary change[/inlinetweet]. With more businesses taking up cloud accounting and online invoicing software, innovative lenders like Waddle have developed financing products that can connect to your software online and automate the entire lending process. Just like downloading a new app on your phone, you can simply connect Waddle to your accounts, obtain a finance offer and be up and running within a day, getting on-going access to new funding against your outstanding invoices.
Invoice Finance is not factoring
People confuse invoice factoring with invoice finance simply because they both fundamentally base funding on the receivables of a business. Invoice Finance has always been more suited to growing or sustainable businesses.
Invoice Factoring involves the lender taking over the control of collections of invoices. We call this a "notified" or "disclosed" facility. All customers will be contacted by the factoring company with notices placed on your invoices. Factoring companies finance invoice-by-invoice, meaning that each single invoice is treated as a single asset, with a copy of the invoice and supporting paperwork such as proof of delivery required to be sent each time funding is requested.
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Invoice Finance is simply borrowing against invoices
The key words are "finance" and "factoring", invoice financing is how it sounds, the financier will look at your receivable ledger and grant a credit line against this without any disclosure to customers. In traditional invoice finance (sometimes called invoice discounting), businesses are required to undergo audits weekly, monthly or quarterly which involves handing over company documents, invoices and analysis on trading patterns and cash flow movements.
The old process is administratively heavy and cumbersome:
[eckosc_annotation title="Traditional Invoice Factoring" text="Invoice Factoring has traditionally involved many administrational steps. Modern businesses using cloud accounting can now take advantage of data automation."]
[/eckosc_annotation]*the above image was taken from a traditional invoice financing company.
How has invoice finance evolved?
With cloud accounting becoming very popular, online invoice financiers like Waddle have changed the landscape by removing any of the administration involved in qualifying and operating these facilities. For the business owner this means no disruption to their operation and no audits. Once a business creates new invoices these are synced directly to their Waddle account instantly to be drawn-down against for working capital.
[eckosc_annotation title="Automated Invoice Finance" text="Businesses using cloud accounting take advantage of data automation. Almost 100% of traditional invoice factoring admin steps are removed."]
The [inlinetweet prefix="" tweeter="" suffix="@getwaddle"]Waddle's invoice financing app embeds directly between your online accounting or invoicing software[/inlinetweet] and your customer payments. As you raise these invoices it's as simple as clicking "drawdown" funds.
"This is an amazing system. 2 mins in and we had approval!"
- David Hodge *Certified Xero Review
*Only for cloud accounting users
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