Cash flow loan, cash flow finance
Businesses have many options when considering cash flow loan funding for their business. Bank loans and overdrafts have historically been the preferred choice of cash flow finance. However, today more and more businesses are waking up to the real benefits of alternative sources of finance.
What are the alternatives?
Solutions such as factoring and invoice discounting can provide businesses with a flexible and ongoing supply of funds by releasing money tied up in unpaid invoices. More than 39,000 SME’s now use this form of cash flow finance and it is regarded as a mainstream cash flow loan opportunity.
Factoring or invoice discounting are where the finance company will turn up to 85 per cent of the value of each sales invoice into cash within 24 hours. The finance company can work alongside the business to collect in any outstanding payments of those invoices from the customers. The remaining 15 per cent, less a small service fee, is paid to the business once payment has been received.
What are the benefits?
The benefits of cash flow finance to a business are that it not only receives an immediate cash flow loan but also gains access to an on-going source of funds, linked directly to current sales. It can improve profitability as the business pays suppliers early, buys in larger quantities and takes advantages of any volume discounts that are available. Businesses using a factoring facility can also save costs on postage, stationery, telephone calls and most importantly it allows managers to spend their time more productively developing business instead of chasing payment.