AFN Guide to Invoice Trading
What if I told you that there was a way to avoid chasing down all those unpaid invoices? And you could get a good chunk of the value of those invoices right now without having to wait? Don’t believe me? If not, then you’ve likely never heard of invoice trading before. Read on to learn everything you need to know about this alternative funding method for your small business.
The Basics of Invoice Trading
In a nutshell, invoice trading produces fast financing for businesses that struggle with customers who pay off their invoices slowly. Rather than wait for their income to stream in, they sell their invoices for a percentage of their value. This way, the financed company gets instant funds and the third-party gets the full value of the invoices over an extended period of time.
Are you considering financing your business with invoice trading? If so, then here’s how it would work:
• You submit your invoice details to an invoice trading company
• The company confirms you’re eligible for funding
• Sell your receivable invoices
• Receiving payment as a percentage of the invoice’s value as an advance
• The debtor continues to pay off their invoice to the trading company
• You get a second payment once the debtor pays off their invoice
The costs of this type of funding are highly dependent on the company you choose to work with. Always verify the details of your arrangement before you sign off on any deals.
Advantages of Invoice Trading
One of the biggest advantages of invoice trading funding is that you get the funds you need right away. You won’t have to wait for your customers to pay off their invoices, which could be a source of frustration for your business. Instead, you get a cash advance at little cost.
Additionally, invoice trading is that you get to outsource your payment collection process. As a small business owner, you’ve likely had first-hand experience with at least one customer who took your invoice due dates as a suggestion. If you decide to go this route, then you won’t have to worry about when your invoices eventually get paid off. You also won’t have to go through the tedious task of attempting to collect invoices that have fallen into obscurity.
Another pro of financing method is that you can immediately reinvest your money into your business once a service is rendered or a product is sold. All of this makes for easier cash flow management.
Disadvantages to Consider
Like all good things in life, there are disadvantages to this type of funding, too. You are paying for immediate funding, so there is a cost associated with the services. Depending on the company you work with, you could also be charged additional fees.
How to Find an Invoice Trading Company to Work With
Thankfully, the disadvantages can be minimized if you choose to work with a reputable and respectable company. Not sure where to look for invoice trading companies? Here are a few companies to get you started:
Of course, you can always turn to the web when looking for invoice trading companies, too. Just be sure to do your due diligence and research each company that you’re considering doing business with. The last thing you want is to have the headache of dealing with hidden fees or complicated fine print that leaves you in the dark.
Are you a small business owner that’s considering your funding options? Invoice trading could be a good choice for your business, but it’s also important for you to know all the alternatives, too. Here are a few alternative funding options to consider:
• Online lending
• Peer to Peer lending
• Inventory financing
• Merchant cash advances
If you lack credit, then getting funding will be a struggle. Despite that, it is possible for you to get the funds you need to get your business ideas off the ground.