Invoice Financing: Everything You Need to Know

Business Growth
June 24, 2020

If your business is looking to fill short-term capital gaps, would it be wise to take out a loan from a bank? Not if you need cash quickly to cover payroll, taxes, raw materials, or overhead costs. Most loans would require a waiting period of 45 to 75 days. If you need the money to cover critical business expenses, you simply cannot afford to wait that long. Fortunately, you can use your accounts receivables to obtain financing and meet your short-term cash flow needs through Invoice Financing.

What is Invoice Financing

As the name suggests, Invoice Financing is a type of alternative financing and is a quick and easy way to obtain extra cash by using your invoices. First Circle defines an invoice as a document issued by suppliers to buyers after a product or service has been delivered as a bill or a statement of the amount due to be paid after a specified timeline.

Through this financing alternative, a third-party company provides business owners additional cash for the money they are waiting to collect from an invoice.

The most suitable financing option depends on the financial situation of your business. Invoice Financing is better suited to certain situations—like temporary cash flow gaps—and may be the best fit for some business owners—especially SMEs—seeking alternative financing sources. Here’s a quick rundown of some benefits that businesses can get from invoice financing:

The Benefits of Invoice Financing

1. Easy way to get funding

Compared to bank loans and business lines of credit, obtaining cash through invoice financing is much easier. Bank financing usually takes weeks to process. But with invoice financing, you can get approved in as fast as three business days. If you need cash to cover your recurring business expenses.

2. Early access to your own money

The biggest downside of bank loan financing for short-term working capital is that it shows up on your balance sheet and limits your future financing options where bank financing might be a better fit—like purchasing plant and equipment to expand your manufacturing capacity or opening an office in a new city for example. With Invoice Financing, the hassles associated with loan processing are eliminated or streamlined. You are merely advancing cash from your unpaid invoices in a much simpler, faster, and more convenient process.

3. A continuous flow of cash

In business, the saying “cash flow is king” is an absolute truth. Cash for a business is like blood for a human body—the business dies if it runs out of cash. Unfortunately, the nature of many business expenses is that they are not matched well to incoming cash flows. The expenses recur regularly and put constant pressure on your bank balances. Cash inflows, on the other hand, are highly variable by comparison.

Using invoice financing to make prudent cash management decisions enables SMEs to match incoming cash with expense requirements, especially in times when business growth requires significant new investment in recurring monthly expenses.

4. Confidence in growing your business

When growth opportunities come knocking, the first thing a business owner should be concerned with is whether cash on hand is sufficient to support requirements for the new opportunity. Before taking on a new contract or a new project, ensure you have enough funding to support it. With the convenience and quick approvals for invoice financing, you can confidently grow your business, and take on more clients and projects without fretting over your ability to meet cash needs.

5. Better business focus

Staying focused on the things you need to do to achieve your business goals is certainly difficult enough that you don’t need cash flow worries to distract your focus. Through invoice financing, you can zero in on your priorities and focus on the direction you want your business to take.

How to Qualify for Invoice Financing?

At First Circle, loan eligibility starts when you complete the Personal and Business TrustPass. To get the Personal TrustPass and the Business TrustPass, you need to submit the following requirements:

Personal Requirements

  1. Primary ID
  2. Secondary ID
  3. Email address

Business Requirements

  1. DTI or SEC Certificate of Registration
  2. BIR Certificate of Registration
  3. Duly-filled out General Information Sheet (for Corporations only)
  4. Proof of Billing

Upon completion, simply submit your invoice and wait for the cash to come through.
Many business owners hold out on growing their business because they do not have the funds to expand their operations. After all, equipment acquisition and new raw materials require additional funding.

Invoice Financing opens doors to more business growth possibilities, so you won’t have to stall your SME’s momentum. Are you ready to move your business to the next level? We can help.

First Circle is a company that takes pride in empowering local SMEs to grow and scale by providing easily accessible funds to cover capital gaps. Click here to apply for business financing.

Need business financing today? Apply for one with First Circle by clicking here.

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