As a start up or a small business owner may soon discover, funds may not always be present, even if the business is earning money. When dealing with customers who require bulk orders and large stock, it may be necessary to have them pay via invoice in order to keep their business, This arrangement can take up to 90 days to liquidate. The most basic business finance solution would see if the company qualifies for a bank loan, but in today’s unstable economy, who knows what the chances are of actually getting approved. There are other business finance options offered, but most of them involve collateral that one may not have, as well as a high degree of risk. The business finance option that is gaining ground among small businesses is that of invoice financing. This business finance option has many advantages for the small business owner. Below we discuss some of them.
1. Invoice financing gives the business owner less of a risk through management of the debtor concentration risk- what are we saying here? In your standard bank loan, the bank will ask you to give kind of collateral to ensure that you can actually pay back the loan that they give you in the event that the business does not make money. Common collaterals may range from house mortgage, your car, or other properties that you may have, that may not even be connected to the business. This financing option puts the small business in danger of losing everything that he has in case the business goes down. Because invoice financing does not handle extremely huge amounts of money, then collaterals of this nature are not needed. All that will be asked by the finance company are the invoices and their amount, which they will be collecting after the 90 days are up.

2. Invoice financing encourages transparency and clarity with regards to how much the business is making- The disadvantage with getting a large amount of money through a bank loan is that one may think that the money has already been earned and can be readily spent. Invoice factoring, does not provide you with money that you have not earned. Instead, the earned cash is monitored through the amount in the invoice. The business owner can then make the adjustments as to how much he should spend, given how much money the company made in that time frame.

3. Invoice financing leads business owners to complete automation of real time balances for client payments- because of the terms that have to be followed in invoice financing, business owners have instant access to cash and can decide freely what is to be done with it. He can easily address what his business needs NOW as opposed to waiting for another 90 days, when that need can blossom into a problem for the business.

For small businesses looking for day to day financing solutions, invoice financing is presenting to be a real viable option. Anyone can learn more about invoice discounting contacting business financing companies in their area.