What is Invoice Financing and How Does it Work?

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Businesses which invoice their customers for payment often face a lengthy waiting time of between 30-120 days before receiving payment in full. This can cause major problems for the overall cash flow of the business and even bring operations to a grinding halt in the most severe circumstances.

Invoice financing exists to cut out the problematic waiting times associated with invoices. Here is some further information.

Create Invoice
Create Invoice

How Does it Work?

When using invoice financing, you are essentially paying a third party (the factor) such as marketinvoice to forward you a large percentage of the money for an invoice immediately, on the premise that the customer will eventually pay the factor in full. The factor then forwards you the small remainder of money after receiving payment for the outstanding invoice.

This means at you can access the value of the invoice immediately and use the money as you see fit without having to delay business operations because of a lack of funding.

Invoices
Invoices

Cash Boost

The cash which goes into your business immediately can often be a lifesaver if your cash flow is running low and you are struggling to fund business operations. Since you usually receive funds from the factor within 24 hours, you can begin planning how to use the money as soon as you have sent the invoice out.

Good cash flow usually equates to a healthy business and is a truly irreplaceable asset to have. Invoice financing is an excellent means of stimulating cash flow and facilitating further business operations as it provides the necessary funding to take on more jobs.

Reinvestment

Invoice financing also provides an effective reinvestment fund for business owners who want their business to continue expanding and growing. Businesses which lack reinvestment run the risk of stagnating, which can prove to be an existential threat in the long run.

Invoice Financing
Invoice Financing

With the ability to access immediate funding for further business operations, you can ensure that your enterprise is running smoothly, efficiently and effectively. You also save an immense amount of time which would usually be spent chasing and managing the various invoices which you haven’t received payment for, so the advantages of using invoice financing stack up quite significantly.

Businesses of all shapes and sizes can reap the benefits of invoice financing, although those with cash flow problems or which are in their early phases can particularly feel the advantages. Provided the funding is used wisely, it can provide the means to successfully develop and grow your business.