Five Reasons Why Invoice Finance May Be the Best Option for Your SME

It’s been another difficult few months for small to medium enterprises (SMEs) across Australia. Smaller businesses often bear the brunt of the lockdowns due to their lack of scale and resources, working-from-home infrastructure and the nature of the industries they operate within – which are oftentimes considered less essential. Nonetheless, SMEs make up the bulk of businesses. By count, 99.8% are SMEs, so you certainly have good company. 

As the backbone of the Australian economy, the financial health of SMEs is critical. Although the events of the last year will likely not be repeated, it’s evident that all businesses need a backup plan for their operations and a flexible financing solution that’s adaptable and dependable when economic and operating situations change. Invoice finance is an increasingly popular financing service for SMEs across Australia for many reasons, including its scalability and accessibility. Here are five reasons why invoice finance may be the best option for your SME to consider implementing today. 

Reason #1 – Your sales are seasonal

Traditional financing options such as bank loans are fixed throughout the year, no matter how your SMEs cash flow is performing. This can make it difficult to meet repayments when times get tough. There’s not much flexibility, and you’re at the mercy of the bank’s conditions. Invoice finance helps you to reduce the variance in your cash flow throughout the year. 

Let’s use a beach-based travel operator to make an example; under normal circumstances, most of their business will come during the summer. Since funding is linked to outstanding invoices, when sales are high, invoice finance provides greater funding and repayments to match. When sales drop off during winter, the liability scales down and makes managing your financing a much more flexible and supportive endeavour. 

Reason #2 – Your sales are rapidly increasing

If your SME is growing fast, you’ll know there’s a lot to consider, including your finance. Booming sales is a great thing, although it’s often met with cash flow pressures. If you’re selling goods and services on credit, it may take 45 to 90 days to receive cash from late-paying customers. Throughout this period, you’ll need to fund stock, staff and manufacturing required to meet the order. If the timing isn’t managed carefully, you may be left in a precarious position. Invoice finance provides quick funding linked to your sales, which means that as your working capital requirements increase, so does your access to funding. 

Reason #3 – You need funds fast

Banks move slowly, and SMEs often don’t have time for that. If you need funding fast, relying on traditional finance will not do you any favours. Invoice finance facilities are usually approved within a matter of days, with funding in your bank account within 24 hours of you issuing invoices to your clients. If you’re missing growth opportunities or incurring unnecessary costs due to a lack of available funding and slow providers, innovative and responsive non-bank invoice finance lenders are a great alternative solution for your business. 

Reason #4 – You don’t have a property to offer as security

Many financing options, particularly secured loans from banks, require some form of personal or commercial property as security for the loan. Many SME owners will be hesitant to risk their critical property to fund their business through a loan or an overdraft. Invoice finance is not secured by property and therefore allows you to keep these assets separate, reduce their risk or borrow against them for other personal purposes.

Reason #5 – You want your business to stand by itself

Invoice finance is excellent for SME owners that want to keep their personal life separate. The facility is linked to your business assets (outstanding invoices) and not your personal situation. Divorces, deaths and other family issues often impact personal property and secured assets making invoice finance an attractive alternative. If you’re looking to sell off your SME down the road, there may also be no requirement that the buyer provides sufficient equity to maintain the invoice financing facility. Furthermore, prohibitive requirements such as an extensive trading history of longer than two years may have more leniency with invoice finance providers. Many only require six months of history for smaller facilities.

Whatever your reason for considering external finance in an uncertain environment, it’s clear that invoice finance is one of the most flexible and accommodative options for SMEs. OptiPay is here to help Australian businesses grow with access to fast and flexible funding, including invoice finance. We’re here to help you with your business’s unique financing situation; get in touch today to see what options are available to you.

Share This Story

On the lookout to improve your business finances?

Stay ahead, sign up to the Optipay Finance Newsletter.

OptiPay Cash Flow Finder