How To End Single Invoice Finance Misconceptions
Single Invoice Finance comes in two forms namely factoring and discounting. Both methods have become superstars in the world of finance and have been two of the most sought after among business owners and entrepreneurs alike. However despite their popularity and widespread use, a good number of misconceptions still continue to hunt them. That’s bound to end today as we lay down the facts from the fallacies with this list.
The Misconception – “It’s another form of debt.”
Of all the lies and misconceptions about single invoice finance, this is perhaps the most rampant. It’s not that surprising given that a good majority of financial options in the market fall under the category of credit. Just keep in mind that this one begs to differ as it is an asset transaction. It generates funds by virtue of advancing the value of an invoice, one that is yet to mature and yet to be paid at a future date. In the books, it appears as a decrease in trade receivables coupled by an increase in cash.
The Misconception – “It’s only for the established entities.”
Most small to medium scale enterprises, recovering entities and startup companies often shy out of trying to finance their endeavors with the help of financial providers thinking that their application will get rejected anyway. The good news is, single invoice finance is no debt thus it comes without interest and collateral. Even the smallest and youngest entrepreneurs can apply for it because it has no asset level requirements. This makes it faster to process too. Plus in terms of creditworthiness, providers need that of the customer’s to whom the invoice is attached to not the company’s.
The Misconception – “Receivable value is lost in the process.”
Let’s review the process. First, the provider gives the company an advance of the chosen invoice’s value even before the owing customer pays for it. The amount is equivalent to at least eighty percent and as much as ninety-five percent of the total value. The remainder shall only be released and forwarded to the company once the customer has paid in full which is decreased by a predetermined fee.
The Misconception – “It’s expensive.”
As previously mentioned, single invoice finance only involves a predetermined fee which is agreed by both parties at the onset. Moreover, since this is a onetime transaction the fee also happens once. There are no lengthy contracts and obligations involved.
What is invoice finance?
More on invoice finance at http://workingcapitalpartners.com.