Invoice Financing for your Business

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: 

  1. You (seller) sell a good or service to a customer (buyer). Then, you issue an invoice which has a credit term of 120 days. 
  1. You submit the invoice to Lyte Finance for verification. 
  1. Lyte Finance gives you cash advance of up to 90% of the invoice submitted. 
  1. Buyer makes full payment to Lyte Finance on invoice due date. 
  1. 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. 

Interested to know more? Reach out to us at [email protected] for a discussion! Alternatively, contact us here

Venture Debt/ Venture Lending as a Complement to Equity Financing

Venture Debt vs Venture Capital, which is better?

Are you ready to bring your startup to the next level? Are you thinking of raising from Venture Capitals (VCs) or Venture Debts (VDs)?

We can all agree that money is one of the most significant factors in a SME’s success. In fact, according to an article written by Forbes, one of the most common reasons behind why businesses fail is the lack of capital or funding. Today, SMEs have more financing alternatives than the traditional equity financing from venture capitals.

Equity Financing

Equity financing involves selling a portion of the startup in return for capital. For example, when Firm A wants to raise capital for its operations and expansion overseas, the owner decides to sell its 15% ownership to a group of investors in return for capital. The investor now owns 15% of the company whereas the owner owns 85%. Although the owner has no obligation to repay the investor, there are downsides to this. In future equity financing rounds, the owner would have to give up more of its company and share profits with its investors.

Venture Debt Financing

Venture debt financing can be an alternative or complement to equity financing as it prevents dilution of the owners and its existing investors equity stake. Besides, collateral is not required as startups have yet achieved positive cash flows to obtain conventional loans from traditional financial institutions. Instead, lenders are sometimes compensated with the company’s warrants. 

Venture Debt as a Complement to Equity Financing

Let us take a deeper dive into venture debt as a complement to equity financing.

Typically, startups take on venture debt after an equity raise. This increases the total amount raised without diluting more equity owned by entrepreneurs and investors. Besides, this extends the cash runway of startups which promotes confidence in its stakeholders. With so much uncertainty surrounding us it also acts as a buffer for what can go wrong, for instance, cancelled contracts and projects from clients.

However, many early-stage startups rarely consider debt financing as a funding source because of the following misconceptions:

  • Debt funding for startups is too expensive
  • Debt funding from venture debt lenders should be last resort
  • Early-stage startups are unable to obtain startup loans due to poor cash flow and poor business credit score
  • Debt funding for startups is bad for profit

Some also think venture debt is synonymous with convertible debt/ convertible notes. The latter can be converted into equity, but such rights are not attached to a venture debt. This is optimum for founders that want to avoid painful dilution. Debt has been hard wired in us as a ‘bad thing’ but think about the possibilities you can unravel. A short-term debt facility could allow you to fuel your startup’s growth with little equity dilution; or increase your cash runway to achieve the next milestone.

Whether you want to take on venture debt or venture capital, there are many flexible options out there. Here at Lyte Finance, we provide customizable debt structures for your startup. Speak to us by reaching out at [email protected]

Spending Your Business Loan Effectively

Are you thinking of scaling up your business with a business loan?

Do you require a working capital loan to purchase more inventory?

Would you like to expand your marketing strategy to improve sales?

These are main reasons why business owners take up working capital loans from traditional banks, peers and families, P2P platforms, government institutions etc. Be sure to talk to multiple financiers/ debt providers to compare the rates provided. There could be large discrepancies which could ultimately affect the profitability of your business. 

Now, imagine that everything went as planned with the working capital loan approved. How do you ensure your business loan is spent effectively, generating the greatest returns for your business?

Build a Safety Net with your Business Loan

Allocate a portion of the business loan received as emergency funds. With looming uncertainties surrounding the business ecosystem, this safety net could act as a buffer during an emergency, or it could contribute to your bank balance which increases the likelihood of you getting an approval when you apply for working capital loans. Debt providers would feel more assured when the bank balance is sufficient as it shows your business provides them with the confidence that repayments could be done.  

Set Up Automatic Loan Repayments

Late or missed repayments are costly, adversely affecting your business credit score. An auto-debit helps manage your business loan repayment by saving your time and preventing late charges, improving efficiency, making it a win-win situation!

Tranching of Funds

It is common for businesses to seek for a loan quantum that is larger than what’s required. To them, this eases the application process which can be tedious and time consuming. Speak to your debt provider to see if they can provide working capital loans in tranches. This allows you to drawdown multiple times, saving your business expenditure on interest payments.

Conduct Budgeting Before Applying for a Business Loan

It is essential to calculate monetary needs and set appropriate budgets prior to business loan applications. This is especially important when it comes to working capital requirements. SMEs often struggle to plan with their limited resources. Besides, SMEs overlooking business priorities can also bring detrimental consequences. Budgeting provides the business owner a clearer perspective on cash flow, reducing costs, and improving business profitability. 

Utilize your Free Cash

As your business scales with positive returns, your bank balance will increase. Depending on the business’s future prospect, it could be ideal to retire some loans. However, keep in mind some financial institutions would impose charges on early payment. Conduct a cost benefit analysis before making such decisions.

Overall, acquiring a business loan can be financially beneficial for your business. It allows your business operations to run smoothly, especially during times of financial strain. It is also essential to always ensure your business has a healthy credit score to increase the probability of obtaining financing.  Click here to find out how your credit score helps you raise working capital and manage risk.

For more information, do reach out to us at [email protected] for a chat!

Soek Yee

Startup loans Singapore: Finding the right working capital structure for your company

Are you a startup founder looking for startup loans in Singapore?

One of the biggest challenges for SMEs is securing working capital financing. There are many types of financing options readily available in the market, usually categorized into three groups – debt, equity or grants.

We will be breaking down the more commonly used debt instruments below, and briefly cover the grant and equity options as well.

1. Invoice Financing

Invoice financing is a debt instrument pegged to a value portion of an invoice. It will benefit businesses with clear-cut business transactions (hardware supply, services provider) that have long credit terms. Businesses can utilize advanced capital to shorten cash cycle and reduce stress on working capital. 

There are two forms of invoice financing

a) Purchase Order Financing

Purchase Order financing involves financing the supply side of the value chain. For example, Superstar Hardware Pte Ltd received a Purchase Order from All Goods Hypermart Pte Ltd for a total of 5 fridges and went ahead to place an order to purchase the 5 fridges from Supercold Fridges Pte Ltd. Then, a Purchase Order financier would pay Supercold Fridges on behalf of Superstar Hardware.

b) Receivables Financing

In contrast, receivables financing involves advancing outstanding payments from debtors whereby work contracted for has been completed. For instance, Superstar Hardware Pte Ltd successfully delivered all the fridges to All Goods Hypermart Pte Ltd and is awaiting payment under a credit term of 60 days. Then, a receivables financier would come in and pay Superstar Hardware on behalf of All Goods Hypermart.

2. Working Capital Loans

Working capital loans typically have a termed (monthly) or bullet (single) repayment arrangement. Financiers tend to look at the strength of the cashflow, financials and key ratios of a business seeking financing. Frequently, businesses take up working capital loan is to support their day-to-day operation requirements.

3. Project Financing

Project financing is a more bespoke debt instrument where a financier will provide capital in tranches based on a project’s milestones or requirements. It relies heavily on the record of accomplishment of the business executing the project. This is because most financiers are reluctant to finance business with a lack of references. When the business has a healthy track record for completing projects, debt financiers are more likely to extend this kind of instrument. 

Project financing benefits businesses that generate revenue from project execution (constructions sector as an example) with complex terms and milestones. This form of financing provides massive relief to businesses, freeing much needed cashflows to pursue aggressive growth. 

4. Grants

Next, grants are funds given by public body or government entities for various purposes to benefit the economy or public. Usually businesses that are not yet revenue generating benefit most as repayments are not required. They can utilize grants to hire additional talent, build products, and/or to fund research and development activities.

5. Venture Capital

Lastly, in venture capital financing businesses choose to sell a portion of ownership of their company in exchange for capital to fund their growth. Generally speaking, it is usually available to businesses that have hypergrowth potential and a clear path to an exit (an opportunity where financiers can sell their equity at a higher price for return). However, venture capital is not suitable for all businesses. It benefits companies with hyperscale potential that are capital intensive (usually much more than the revenue they can generate in the early days) to scale. 

Closing Thoughts

While working capital loans are suitable for almost every company, ranging from project financing to invoice financing, each financing option comes with pros and cons. Thus, understanding the type of financing available in each category is important as it helps business owners in sourcing for capital more efficiently (avoid barking up the wrong tree). 

For a more in-depth discussion on all the above and more, reach out to us at [email protected]! Happy to have a chat on the the startup loans available for your business in Singapore!

Jake Wong

How to increase your chances of obtaining a SME working capital loan in Singapore

Read to find out more about SME Working Capital Loans in Singapore.

Since the announcement of the Temporary Bridging Loan for SMEs extension to March 2022, I thought this would be good timing to share methods on how you can increase your chances of obtaining a working capital loan

At the start of the Covid-19 pandemic, government support through participating financial institutions (“FI”) eased the burden of SMEs. While many companies received this support, a large number of SMEs did not get the aid they were looking for. Ultimately, the participating FI makes its lending decisions based off their lending parameters.

Before you apply for the Temporary Bridging Loan, here are some tips that can possibly help reduce waiting time and uncertainty. 

1. Purpose of the loan:

The purpose of the loan should be as specific as possible. Try to get into the details to help lenders understand that the requirement is genuine and that the money will help propel the business forward. 

For example, you need working capital to purchase goods worth $100. You are making this purchase to service an order from an existing client. 

2. Presentation of financial documents:

It is really important to have your financial documents prepared and well presented. Lenders appreciate and find it helpful to have your reconciliation up to date to a current and accurate picture of your company’s financial standing.

3. Plans moving forward:

In the same way investors want you to pitch about your company’s future, lenders are equally interested in where the company is going over the next year or two. These plans should be realistic and backed by numbers. 

By providing lenders with a realistic roadmap, you can assure them that you will have the means to pay on time for the duration of the loan.

You can do this, for example, by sharing new contracts you have obtained, how this new contract will increase revenue, how it will impact operating expenses, and ultimately how this impacts your profitability.

It would be helpful to lay out your plans in the following format:

  • Revenue – What is the potential outcome of your new contract? Conversely, if Covid-19 has a negative impact on your business, what are your plans to ride this down trend?
  • Gross Profit Margin – As obvious as this sounds, your cost of goods should not exceed your revenue.
  • Expenses – What does an additional contract mean for your business? Would you have to hire additional headcount? How would it ultimately affect your profitability? Conversely, if your business is severely impacted by Covid-19, what are your plans to reduce expenses and to remain profitable? If you are expected to make losses, what are your plans to stay afloat? For example, we have seen travel companies pivoting to conducting virtual tours. Share these plans with your lenders to get them comfortable with putting money on the table. 

I hope you find this narrative interesting to you. If there are topics you would like us to cover or if you would like to learn more about SME Working Capital Loans in Singapore, feel free to drop us a message at [email protected]

How your credit score helps you raise capital and manage risk.

This article aims to help you understand more about the importance of a Business Credit Report.

Raising Capital

Unless your company is flushed with cash and you never have to worry about capital ever again, you’re probably faced with a common problem: getting money through the door is challenging and expensive. While skilled negotiation, an airtight business plan, and convincing managerial experience can take you far, there is another often overlooked tool in the fundraising toolbox that can be leveraged to take you even further: a strong credit score

When people think about credit scores, they think about individual credit scores. A person’s score has several useful and arguably necessary functions. For example, the score can determine what kind of loan you get and the rates you pay. It can also determine your insurance premium, how much you spend on your cell phone plan, and whether the landlord asks you to put down a one- or four-month security deposit. Your individual credit score, therefore, affects how much money you can access and whether you’re saving a bundle or getting hammered. In other words, with a good score people will find it easier to trust you.

Fortunately, the same credit score principles that apply to an individual can have the same impact on a company. If your company needs a working capital loan and your credit score is stellar, you’ll be able to get more cash at cheaper rates than if you couldn’t provide a score at all. If your company is looking to rent a larger space because you’re expanding, you can use your credit score to negotiate a better monthly rental and park less of your money in the security deposit. In other words, with a good score you will have more bargaining power and less cost.

Managing Risk

Raising capital is just one of the ways your credit score can be beneficial. Let’s say you run a coworking space, full of space for bright eyed startups who need are looking for a place to establish themselves. Some of them are well-run, some of them aren’t, which means that some of them pay on time and some of them may not. If you could get a quick health check on all your occupants, you’d know exactly who to talk to and who looks like they might be struggling and avoid potentially incurring bad debt. And for the companies who have great scores, you could consider offering a reduction on the security deposit to keep them happy with staying in your space. 

If your business is heavily dependent on certain players in your supply chain, having an eye on their financial health and getting their credit score can help you avert a major crisis by looking for alternatives before a portion of your network goes under. On the other hand, if these entities have strong scores, you can improve your relationship with them by providing them better terms. 


So how do you get a viable credit score? Simple, send us your financials and your AP/AR aging reports and we’ll churn out one Business Credit Report, according to your preference. We have two credit reports: “Lite” and “Essential”. “Lite” report is quick and easy: you’ll get your score and a breakdown of your financial metrics. If you need something more involved, our “Essential” report will give you everything the Lite report does, plus an in-depth analysis of your finances. You can apply insights gleaned from the report to tighten up areas of your business and/or use it as leverage when navigating a capital injection.  

To benefit from all of the above, e-mail [email protected].   

-Jean Butel