When structuring your business to accommodate rapid growth, seasonal demand, or opening additional avenues of liquidity; you should note that several funding options are available to your business. Invoice financing may not be the first that comes to mind; however, when used in part with long-term debt or equity financing, you can unlock access to much-needed cash flow, generating further growth for your business.
Invoice financing, otherwise known as factoring, is one of the oldest forms of commercial finance. For years, thousands of businesses have used invoice financing as a viable source to fulfill their working capital needs. Unfortunately, individual players in the industry have painted a different narrative and perpetrated many myths—which can easily be debunked. Here are some common myths about invoice financing that are often mistaken.
Myth 1: Invoice financing is the last resort for struggling companies, who have no other options available to them.
A common stigma about financing invoices is that it's often looked upon as a last resort for failing businesses. The truth is, savvy entrepreneurs commonly use invoice financing to secure flexible and short-term funding solutions, alleviating their immediate need for working capital. The global invoice financing industry exceeds over $3 trillion annually, showing that this method of funding is not a fad—rather a viable and respected form of financing for growing businesses.
Myth 2: Invoice financing is costly.
Invoice financing providers typically charge less than 2% on the face value of an invoice to a creditworthy customer who pays on or around 30 days. Paying 2% on your invoices today means having access to cash for taking on more opportunities, and fueling your growth tomorrow. Not only is invoice financing an affordable option, but it also grants you more control over your cash flow without having to hand over equity or take on additional debt.
Myth 3: Financing invoices means you've lost control over your company.
This myth couldn’t be any farther from the truth. Financing your invoices can free you from time-consuming tasks like collecting payments, and in turn, give you more time to focus on revenue-generating tasks. In most cases, using an invoice financing provider will help reduce your Days Sales Outstanding (DSO) and the amount of time your staff dedicates to account receivables management.
Myth 4: Invoice financing gives the wrong impression to your customer.
An experienced invoice financing provider will work with you to create a targeted communication plan that positions your partnership as a way to ensure your access to capital, which can be used to reinvest in the business and further streamline your accounts receivable management process.
If you’re looking for a debt-free funding solution aligned to meet the needs of your business, give LSQ a call to discuss your options today. LSQ offers flexible invoice financing for businesses of all sizes and has delivered over $20+ billion in funding nationwide. Experience for yourself what thousands of business owners already know, the LSQ difference.
Miguel Serricchio is the Head of Channel Management & Strategy leading LSQ’s efforts to strategically expand its Distribution Channels. Before joining LSQ, Miguel held several Executive Level positions in banking with 30+ years of experience in reshaping business units on a local, regional, and global level. You can find him on LinkedIn @MiguelSerricchio.