More than 80% of businesses that fail cite cash flow issues as the number 1 reason why.
The time delay between sending invoices and being paid for them is a pinch point for cash in any business, as you have to dig into your own pocket to cover all your outgoings.
The problem is, in small businesses without big bank accounts, that’s easier said than done.
Debtor finance, or invoice finance, is a great way to help, and a broker helps to wade through all the options to find the best one for you.
A debtor finance broker helps to navigate the world of invoice finance to find the best solution for your business. They help to make applying for invoice finance easy, represent your business well and find a finance solution that best delivers on your goals.
How does debtor finance work?
Debtor finance is a form of short term business loan that’s based on your invoices, not your assets. Lenders finance the value of invoices for businesses looking to increase their cash flow.
Read more: Understanding debtor finance
It creates the effect of customers paying invoices immediately, and allows business owners to cover their outgoings at a time when they’d usually be waiting for customers to pay. When they do settle their accounts, the lending is repaid.
Benefits of using debtor finance over a business loan
Fast, scalable access to working capital
Debtor finance is quick and easy to get approved, and doesn’t require large assets to serve as security.
The amount of finance that’s available increases as your business grows too – your accounts receivable essentially acts as your credit limit, so if you sell more, you can draw on more funds.
Compensate for late-paying customers
Just about all businesses that make money through invoicing have to deal with late-paying customers at some point. As we’ve mentioned, the time between sending invoices and receiving payment can put pressure on cash flow, and that only grows when customers don’t pay invoices on time.
Debtor finance doesn’t help to get invoices paid faster, but it does make it much easier to bridge the gap.
Better credit control and processes
When you use debtor finance to improve cash flow in your business, you’ll be mindful of optimising your accounts receivable processes so it’s satisfactory to your financier.
This means sending out error-free invoices on time, keeping financial statements in order and monitoring your receivables better than you otherwise would. Keeping in line with best practice, regardless of your motivation for doing it, has flow-on effects for other parts of your business.
Role of a debtor or invoice finance broker
You may be familiar with the concept of a broker in other fields, but there are specific benefits of using a debtor finance broker.
A good debtor finance broker is available when they’re needed. Business needs can pop up at short notice, which make it important to be able to get access to finance quickly.
Good brokers will be readily available and quick to respond.
Read more: Things to know about invoice financing
Flexibility is also important, as being able to call on debtor finance when you need it helps to maximise the impact and reduce the cost. Some providers insist on locking businesses in to finance all of their invoices.
Have up to date knowledge on the changing lending market
The lending market fluctuates regularly, but by normal standards, the last few years have been particularly volatile. Lenders have their own individual products, criteria and benefits, which a debtor finance broker should be able to outline.
Invoice finance is a relatively new field of business finance, and there are new providers and services being developed in the race to compete for new business.
As well as being across the shifting lending landscape, a good debtor finance broker is well informed about all the latest developments within the debtor finance field too.
This is one of the biggest benefits of a broker. They can walk you through all the options, explain the pros and cons of each, and empower you to make the best decision for your business.
Provide choices and answers, not more questions
Invoice finance brokers have a different motivation to bank lending staff. Bank staff are aiming to sell their services, while brokers are more interested in finding the best solution for you.
If you’re not sure what’s best for you, brokers can help to guide you through your journey by making decisions and providing answers in the order that helps you most.
Brokers should also understand that businesses who are looking to get invoice finance probably want it fairly quickly. The more questions they ask you, the longer it takes to arrange the finance you need.
By asking the right questions and taking decisive action, brokers can arrange the best finance deal for your business with a minimum of fuss.
Offer specialist knowledge, experience and connections
If you’re new to invoice finance, you may have some learning to do. It’s relatively simple to understand, but having an expert on hand to walk you through it just makes it easier.
Brokers also deal with different providers regularly, meaning they know their way around different processes and can help to make the process as painless as possible.
Have your best interests at heart
The sign of a successful broker is a happy client. They aren’t (necessarily) motivated to sell particular products or push solutions onto you – for them, a job well done means they’ve helped you find a form of debtor finance that you’re pleased with.
The best brokers will go above and beyond to negotiate the best deals on your behalf and ensure you’re represented as well as possible. This is perhaps the biggest benefit of using an invoice finance broker because it opens doors and opportunities that you couldn’t have access to on your own.
Talk to your finance broker about FundTap
FundTap empowers business owners with flexibility that allows you to have fast, easy access to funding. Talk to your finance broker about your specific situation with FundTap always available as your on demand finance when you need it.
FundTap’s flexibility eliminates the typical risks of business factoring by keeping you in control of customer relationships, keeping the costs of borrowing down and creating a financing safety net that’s available on demand.
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