Funding a new business is always going to be one of the biggest concerns for any founder, invoice finance for startups may be the solutions to starting your business venture.
You will need capital to lift things off the ground and get the ball rolling, as well as money that keeps you alive during the difficult early stages while you settle into everything. Invoice finance for startups is proving to be one of the sure-fire ways for any new businesses to achieving success.
Initially, when your new business is attempting to find its feet, cash flow can often be rather troublesome to maintain. You will have many early costs to cover, such as paying staff member’s wages, covering the rent costs of your premises, purchasing equipment, and buying new stock, just to name a few.
All of these things can be very costly, so late invoice payments will only make the situation even more difficult.
These are just some of the reasons why new start-up small business owners choose to utilise funding methods to fix up any income cracks. There are many different options at your disposal in the modern world, such as crowdfunding, bank loans, overdrafts, and credit cards. Though, the most successful option right now is often proving to be invoice financing.
If you are already making sales, but being held back by late invoice payments, this funding method could be the perfect fit for your start-up venture.
What is invoice financing for startups
Invoice Financing for startups is not the highly complicated funding process that you may have believed it to be. Rather, it is straight forward and used as a helpful aid to new business ventures around the world. Invoice Factoring companies have the services to keep your business ticking over while it finds its place in the market.
Different types of Startup Invoice Finance
You may not be currently aware, but there are indeed different types of startup invoice finance, and one option will be better than the other depending on your situation. If you are unsure of what would be the best fit for your company, please get into contact with one of our advisors today.
Many start-up business owners opt for Invoice Factoring, this types of finance allows you to factor an invoice. The collections are handled by the finance provider.
So, if you like the sound of someone else doing the tedious work and not having to worry about collecting unpaid invoices from clients, this may be the best option for you. All start-up small business ventures need a helping hand at the end of the day, and this is one of the best ways to get one.
For those business owners that prefer to deal with everything themselves and always remain in complete control, Invoice Discounting offers an almost identical service to its counterpart. You will be in responsible for collections when you utilise this method, and all use of an invoice finance product will not be revealed to your customers.
How does startup finance work?
When you have an agreement in place, you will be able to go about your business as usual, though as your invoices are raised, they will be raised with invoice finance provider also. You will instantly receive a paid proportion of the value of the invoice (this will be detailed in your agreement with us) and you will be able to use this however you choose to.
Again, you may use the funding received here to buy new stock, cover the costs of employee wages, grow your business in other areas, etc.
As the invoices are settled by your customers, the rest of the balance will be transferred to you. The only thing taken away will be the small fee for our services. That is the whole process; both simple and straightforward.
This is how startup invoice financing works:
- You raise an invoice and forward it to your customer and also send one to the invoice finance lender.
- The funder will then send you up-to 90% of the value of that invoice direct to your business account.
- Once your client settles the invoice the lender will pay you the remaining 10% less their fees and charges.
- You can also benefit from having an outsourced credit control company provided by the invoice finance company.
This will instantly release working capital so that you can fund your business day-to-day requirements.
Benefits of start-ups finance
The main benefit that invoice finance for startups is that business owners are able to take advantage of is that they will never have to be concerned with increasing overdrafts or taking out new loans as a business grows in size and scale.
Your limits will only be scaled by your turnover, which means that as you develop to either a small or medium sized organisation, this funding will still be able to support you along the way.
- Benefit from improved cash flow
- Better working capital, this means more money for staff training or stock purchases
- It is more flexible than other forms of finance, like small business loans or overdrafts
- Benefit from in-house credit control processes, no need to chase outstanding invoices
- You are free focus on running your business, instead of chasing clients for payment
Does your start up business qualify?
If your start up business deals with other businesses then yes it will qualify. In order for this type of finance to work you need to be raising credit invoices to other businesses. There are a number of criteria and factors that need to be explored namely the nature of your trade, your experience within the industry as well as your status/history.
There are a number of options available if you have a previous adverse credit history. Different funders all have a number of differences in the criteria, but will will be happy to help you with this.
Invoice Finance can help your start-up
If you’re a new business owner or you are currently in the period of planning a start-up business idea, you should think about getting your hands on the security of healthy cash flow, which is exactly what invoice finance can give you.
Remember that while ever you are in the early stages of your business’ life, you should be aiming to avoid falling into any bad debt scenarios and maintaining strong credit control.
Is invoice finance suitable for start-up businesses?
Invoice finance is suitable for start-up businesses if you trade with other businesses or government agencies. Businesses often see this type of finance as a way to free up cash flow and improve their working capital position. However, it can also be a useful tool for start-ups. Invoice financing can provide much-needed funding at a time when start-ups are typically struggling to access traditional forms of finance. It can also help them to manage their cash flow more effectively and make the most of opportunities as they arise. Of course, invoice financing is not suitable for every start-up, but it could be worth considering if you are looking for alternative sources of finance.