One of the major challenges that have faced the any industry for many years now is financing. When you walk around almost everywhere you will not miss a stalled project and all these are attributed to lack of finances. Most financial institutions are not in a position to give credit to big projects, not because they lack funds but sometimes because of uncertainty. This is where invoice finance becomes a better alternative. For example in construction industry, you will find that in any construction project, the contractor is holding much in terms of receivables. They probably may be in the middle of the project or even completed and are waiting for payment from their client.
Unfortunately, most of them can wait up to 90 days before they receive payment and mark you they have their workers waiting to be paid, they have rent, maintenance and so on and so forth. Getting a loan from any bank in order to keep the contractor on toes is not very easy, to mention the least. Nevertheless, most companies have found relief in invoice finance companies. The outstanding invoices they hold can be a great asset for them to access finances. Invoice finance has really helped most companies to leverage on their invoices hence providing them with the much needed capital. All this is at a small cost which the company pays the factoring company.
Invoice finance is a situation in which a company “sells” it invoices to a factoring company and in exchange the factoring company gives the constructor a certain percentage of the face value of the existing invoices. Later when all the bills are paid, the factor pays up the balance less the fee charged by the company which in most cases ranges between 1- 5%. One greatest advantage of invoice finance is that they are able to provide the cash in less than 48 hours from the time of approving the invoices. And the good thing about it is that the funds you receive is not a loan that will need to repay with interest, it is your money.
Invoice finance had for the past been considered as an expensive venture. However, in the recent years companies and other players have come to embrace this form of credit facilitation probably because of its effectiveness in terms of accessing finances. Besides, there are no major hurdles when trying to get funding as long as you have invoices to give up.