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Digitalisation

Flexible invoice financing for SMEs

September 14, 2023
2
Minutes reading time

Invoice financing can be enormously beneficial, especially during challenging economic times, particularly for small businesses, as it can help them overcome financial challenges and improve their liquidity.

What's interesting is that Anglo-Saxon countries already make much more frequent use of these financing opportunities for SMEs, thereby gaining competitive advantages.

Why is that?

Here are some reasons why invoice financing can benefit small and medium-sized businesses during a recession:

  • Liquidity improvement: During a recession, customers may experience payment delays or defaults, which can quickly lead to cash flow problems, especially for smaller businesses. In such cases, the financial cushion is often not as substantial. Invoice financing allows these businesses to receive immediate cash for their outstanding receivables instead of waiting for payments.

  • Risk mitigation: Invoice financing providers often also assume the risk of default on receivables. This means that small businesses do not have to worry about defaulting customers, as the invoice finance provider is responsible for collection.

  • Financial Stability: Invoice financing can help small businesses remain financially stable by providing them with the means to cover ongoing operating expenses, pay suppliers, and maintain business operations even when sales are down.

  • Access to credit: Improved liquidity through invoice financing can strengthen a company's credit rating and increase its chances of obtaining credit from banks or other financial institutions.

  • Flexibility: Invoice financing is flexible and can be used as needed. In times of economic uncertainty, companies can use flexible invoice financing as a short-term solution and use their invoice financing flexibly when the economic situation changes. 

  • Focus on core business: By outsourcing receivables management to the invoice finance provider, small businesses can spend more time and resources focusing on their core business and finding opportunities for growth.

However, it is important to note that invoice financing comes with a cost, which can vary from provider to provider. Small businesses should carefully consider whether the benefits of their chosen invoice financing solution justify the cost, especially during economic downturns, and may want to consider other financing options. And, most importantly, don't feel the need to commit financially, but instead prioritize flexibility. 

Therefore, when choosing a provider, it is crucial to pay special attention to selecting a solution that offers the necessary flexibility, which is exceptionally important for smaller businesses. Especially for SMEs, it is essential that the provider offers a solution that can be used according to their specific needs, without committing to any form of mandatory obligation.

A modern solution for invoice financing, which works on the basis of electronic invoices, offers the possibility -explicitly and flexibly- to offer only individual invoices for financing!

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