Invoice financing, when used appropriately, is a beneficial financial product within the manufacturing industry. Manufacturing businesses often struggle to maintain consistent cash-flow making it difficult to budget effectively. Times of economic downturn and business growth can both put strain on the cash-flow of manufacturing organisations; this is where utilising invoice finance facilities can assist business to navigate peaks and troughs and maintain liquidity and trading viability.
What is Invoice Finance?
Briefly, invoice finance is a credit service that can be utilised by many different types of business. Essentially a creditor lends your manufacturing business the money against unpaid invoices owed to you. The process works as follows:
- Business raises an invoice for a customer
- Invoice finance company pays your business up to 95% of the invoice value
- When invoice is paid the debt is cleared and you receive any outstanding amount minus the agreed service fees
Invoice Financing in the Manufacturing Sector
During times of economic uncertainty, such as the COVID-19 pandemic that marred much of 2020 and into 2021, it is easily understandable that orders are slow and business finances become stretched. In these circumstances it is expected that firms inside and outside of manufacturing would potentially be looking at ways to increase cash-flow by utilising finance options. In this circumstance cash could be raised against unpaid invoices using an invoice finance creditor – using a broker such as the invoice finance service offered by MC Commercial Finance can make this process quick and easy for your business.
However, many people may question the need for finance solutions during periods of business growth. In this instance, particularly in the manufacturing sector, large order value that requires a big financial input for raw materials or machinery to complete the job can be prohibitive to growth as the business struggles to balance cash-flow. Invoice finance could be the solution that your business is looking for to provide the necessary upfront cash required to take on larger orders and ultimately grow the business.
Benefits of Invoice Finance for Manufacturing Firms
There are many benefits of choosing invoice finance to help your manufacturing business succeed, whether you are in the midst of business downturn or a growth phase. Some of the main benefits are highlighted below:
- Immediate access to cash
- Business growth
- No ongoing repayments
- Revolving line of credit to meet current business needs
- Reduced risk as a business
Immediate Access to Cash
Invoice finance can be quickly arranged, in fact in some circumstances cash can be in your business account within 24 hours of application. As the money is paid to your business against a debt that is owed to you invoice finance is not a loan, and therefore doesn’t require in-depth financial history, masses of paperwork or time-consuming credit checks.
Invoice finance may not be suitable for every business; but is a viable option for many manufacturing firms. Call or email MC Commercial Finance, we can help you set up an invoice financing solution that meets the needs of your organisation.
Growing a business can be costly; the phrase ‘speculate to accumulate’ rings true particularly in the manufacturing sector. The cost of raw materials, machinery or manpower can be prohibitive to successfully growing a business. Invoice finance can help you to overcome those difficulties. As opposed to waiting up to 120 days after the job is complete for invoice payment, you can get advanced payment to cover the upfront costs of a large order. This allows you to fulfil a project that would otherwise be outside of your financial and cash-flow reach, eventually resulting in business growth.
No Ongoing Repayments
As invoice finance is not a loan there is no ongoing monthly commitment to make repayments. The invoice finance debt is settled when your customer pays their bill. At this point any outstanding balance is paid to you. Without an ongoing financial commitment, you increase cash-flow stability for your business.
Revolving Line of Credit to Meet Business Requirements
Invoice financing is a short-term loan, meaning that once your customer pays their bill the credit agreement comes to an end, allowing you to use this form of credit repeatedly as required. Invoice finance also has an element of flexibility, you can choose how much to borrow against the invoice. The maximum is usually 95%, but does vary; however, if you have a large invoice and only require 50% upfront this can be arranged minimising your debt liability while maximising your cash-flow and ability to grow.
Reduced Business Risk
Taking on an order larger than your current situation allows can be financially risky. What if you pay out for machinery, personnel or raw materials and then the sale doesn’t materialise, or the customer delays payment or even defaults on payment? By utilising an invoice finance facility, the credit provider takes on some of that risk, allowing you to feel more confident in fulfilling the order.
Why Choose MC Commercial Finance for Invoice Financing?
MC Commercial Finance has many years of experience in helping businesses within the manufacturing sector to secure financing solutions that meet their requirements. We are a broker offering a full range of products including invoice finance. Contact us today to discuss your business and let us help you secure an invoice financing agreement to help steer your manufacturing business out of the COVID-19 slump and/or through a growth phase.