What is Invoice Financing and how can it help your business?
Is your business experiencing delayed payments? Are your clients requesting for longer credit terms?
Having an effective and efficient account receivables collection is the key to ensuring that your business has a healthy cash flow. If you are having issues with account receivables collection or looking to improve your cash flow, invoice financing might be just the perfect tool for your business!
And so, what exactly is invoice financing and how does it work?
Invoice financing is a short-term financing tool that allows businesses to advance money against their unpaid invoices. To give you a better understanding, let us take your through the invoice financing process as follows:
- You (seller) sell a good or service to a customer (buyer). Then, you issue an invoice which has a credit term of 120 days.
- You submit the invoice to Lyte Finance for verification.
- Lyte Finance gives you cash advance of up to 90% of the invoice submitted.
- Buyer makes full payment to Lyte Finance on invoice due date.
- Lyte Finance sends you the balance of the invoice amount less service and financing fee.
In just 5 simple steps, your business can enjoy the following benefits:
- Funds are available quickly
Firstly, invoice financing typically has fast processing time, making immediate cash upfront possible. Upon the submission of verified invoices, funds are typically disbursed within several days. As a result, you do not have to wait for your customers to pay on invoice due date which ranges between 60 to 120 days, depending on your credit terms.
- Improve your working capital cycle
Moreover, the longer the account receivables collection period, the longer your working capital cycle will be. The sale of your sales invoices will allow you to improve your working capital cycle and help unlock your tied-up cash which improves your ability to pay for expenses, repay debt and acquire capital upfront for business expansion.
- Ability to offer competitive credit terms to buyers
Besides, invoice financing gives you the ability to offer your customers longer payment term as you are able to obtain immediate cash well before the due date. This will in turn enable you to work with bigger and reputable companies that typically request for better and longer credit terms from their suppliers.
- Better financial presentation
Lastly, invoice financing helps to convert your account receivables to cash quickly. Financed invoices are considered as contingent liabilities, an off-balance sheet item.
Besides, you can help your business improve its cash flow, manage volatile payment cycles and acquire upfront capital to expand your business.