In a recent study carried out by Amicus Finance Plc, 18% of small businesses have considered using cash flow/invoice finance within the past 5 years, making it the second most popular option of those presented (behind crowdsourcing finance at 24%). That amounts to almost half of the 42% of respondents who had considered using any form of alternative finance whatsoever, and almost a fifth of all respondents put together.
So, why are 18% of UK businesses turning to invoice finance as their source of funding, and should you be following suit?
Paid When You Need It
The costs you need to pay don’t always occur at the same time as your incoming money. This is especially true when your business involves placing contractors, who will expect to be paid to one schedule, regardless of your client’s own payment schedule. When you’re stuck with money that needs to go out and you’re still waiting for money to come in, you’re going to have to make a decision about how to handle the situation.
If you already have savings you can use, this will allow you to pay your costs before getting paid. Maintaining cash flow in this situation can be awkward, and you can’t always rely on having the money you need to hand.
By using invoice financing, you can get the money you need, when you need it, and use that to pay your costs before your own invoices are due. This way you aren’t left in a situation with costs you can’t pay.
Maintain Cash flow
It’s important to make sure you have at least as much cash coming into the business as is going out at all times, preferably more. When placing contractors, this isn’t an easy task. Contractors will need to be paid to one schedule, but your clients will be paying on a different schedule. On top of this, you have your own running costs as a business that need to be met.
Trying to maintain a steady cash flow throughout this process is a difficult balancing act, and will leave you with little time to figure out what your profits are, let alone what you’re spending them on.
It’s important to make sure you know how much money is coming into your business at all times, and how much is going out, and using invoice financing is the perfect way to balance these two figures. With invoice financing you will maintain a steady cash flow that enables you to look at the bigger picture of how to expand your business.
The flexibility of invoice financing is often overlooked. You can base your entire business model around invoice financing, or only use it when you’re strapped for cash. You can make a conscious decision to use invoice financing for a certain percentage of your business, and you can choose to stop using it when it’s no longer necessary.
Using a business loan gives you a long term commitment to repayment, and requires you to know long in advance how much you will need. Seeking investment could leave you with even longer commitments, when investors require shares in your company. Relying on personal finance can leave you in the lurch at a difficult time.
With invoice financing you can use as much or as little as you need or want.
No Need to Chase Up Invoices
Invoice financing saves you time on chasing up your invoices. That’s time that could be better spent on figuring out where you want to grow your business, meeting new clients and making placements. In short, you get to focus on running your business and doing what you’re good at, while not having to worry about collecting the invoices.
Fund My Contractor’s short term contractor invoice finance for recruitment agencies takes your invoice finance options a step further. We can help you access funds even if you have been denied previously due to poor credit. We can set up short term arrangements, so you don’t need to be tied into long term deals. We can even finance international placements.
If you’re one of the 18% of businesses considering short term finance, consider Fund My Contractor as your finance provider of choice.
Call us now on 0845 8811 112 to discuss.