Being an entrepreneur of a start-up business, finding the right financiers to invest their money into your organization can turn out to be an overwhelming task for you. Experts specializing in this field say in a vast majority of cases these proprietors trend to look in the wrong direction when it comes gather funds for their businesses. They focus their attention on trying to obtain bank loans and venture capital when there are other convenient options.
George Ammar – Why should entrepreneurs opt for invoice financing?
George Ammar, a Certified Public Accountant and former Chief Financial Officer of Resilience Capital Partners LLC, says these businessmen should opt for invoice financing. He goes on to point out the following 4 important advantages of this mode of financing:
- Get instant cash
When you opt for a traditional bank loan to finance your business, you need to ensure that the paperwork concerning the finances of your organization is in order. The person representing the bank will then scrutinize such documents to make sure you meet all eligibility requirements before asking you to fill in an application. After this, you may have to wait for weeks before the bank sanctions your loan. In the case of invoice financing, the invoice financier will first satisfy himself/herself that your invoices are in order and the creditworthiness of your clients. Once you fulfill this criterion, you can get the money you need to operate your business as soon as you present your outstanding invoices to him/her.
- Enhances your collection efforts
In the case of invoice financing, you can get cash equivalent to 90% of the book value of your outstanding account receivables. The financier will also deduct his remuneration and other expenses that he may incur on your behalf from this amount before giving you rest of the money. However, your invoice financier now becomes responsible for collecting the money your slow-paying customers owe you.
- Helps you avoid incurring unnecessary debt
In invoice financing, you receive money to operate your business from your slow-paying clients who owe you this amount. This means you are using your own assets to obtain the cash you need to ensure your establishment is the ability to carry out its operations in the market. This is the more viable option than applying for a loan by using one of your business assets as a collateral.
- Unlimited funds
When you opt for a business loan, the banker will sanction your loan depending upon how much cash you need to operate your business. In the case of invoice financing, there is no limit to the amount of money you can get as long you as raise valid invoices on the customers who buy your products. This makes it possible for you to obtain the funds you need to expand your business.
George Ammar says getting a banker to approve your loan application can be very difficult even when your business is generating revenues. However, invoice financing offers you a flexible way to obtain the money you need to operate your business. Moreover, the number of funds you can get in direct proportion to the quantum of sales your organization generates and a number of invoices your raise on your customers.