What Is Invoice Financing?
Invoice financing, or receivables financing, is a form of short term financing that allows a business to borrow against their customers’ unpaid invoices. It differs from the typical unsecured business term loans, because businesses pledge these invoices or account receivables as collateral to receive funds upfront. This business practice is also known as factoring, or factoring invoicing.
Businesses that provide goods or services in bulk to other businesses usually do so on credit. This means that payment is not due immediately, but on a fixed date sometime in the future. In such cases, businesses commonly issue invoices to their customers as an official notice containing the total amount and due date agreed upon by the buyer. Such arrangements are more common in business to business (B2B) operating models, highlighting the significance of invoice financing in facilitating efficient cash flow management for businesses.
However, offering credit as payment terms to buyers can come with disadvantageous consequences. Unpaid invoices tie up the sales revenue that could have been reinvested to grow the business. As a result, the narrowing cash flow diminishes the business’s profitability. For example, businesses who submitted their invoice to Vendors@Gov for their goods and services may need to wait 30 days or more before receiving payment, depending on the payment term provided. With invoice financing in Singapore, your business can increase working capital and maintain your business’ ability to pay for its operating expenses, thus facilitating business growth. Your business will also be able to retain cash flow for urgent needs that may arise unexpectedly.
Hence, invoice financing could be a way for your business to overcome the problems that arise from unpaid invoices. By pledging your invoice to a private funder, you can immediately obtain funds based on a fraction of your invoice amount.
Is Invoice Financing Right For My Business?
As an SME owner, you know the struggle of juggling cash flow. That’s why invoice financing is a game-changer. It’s like having a magic button for your outstanding invoices, letting you focus on what you do best – running and growing your business.
4 Benefits of Invoice Financing in Singapore
Immediate Access To Funds
Invoice financing provides you with immediate access to funds tied to your account receivables, increasing your working capital and speeding up your business lifecycle. This ensures that your business will also have access to funds when urgent needs arise. With Poss Capital, you can receive funds within 48 hours of approval. This means that you can be paid as soon as an invoice has been issued to your customer, instead of having to wait for their payment.
No Additional Collateral Required
Invoice financing is based on the value of unpaid invoices, rather than tangible assets. The invoice itself is being pledged as collateral. Therefore, no additional collateral is required. You will not be putting any other business assets at risk.
Flexible Credit Terms
With invoice financing, you will now be able to offer longer credit terms to your buyers, since you can convert your invoices to available working capital before the due date. Hence, you will be able to attract more established customers, who usually favour longer term contracts.
Growth Opportunities
With increased access to funds, you can invest in initiatives that foster business growth, such as expansion or marketing campaigns. Focus on growing your business without having to worry about delayed payments with invoice financing.
Introducing Payd By Poss
At Poss, our purpose is to lend a helping hand to growing SMEs in Singapore and help you achieve your business goals. With this in mind, we have a fuss-free online application and quick approval process, allowing you to gain access to your funds in no time.
- Invoice financing of up to S$100,000 split into 3 equal repayments
- Factor fee from as low as 1.2% per month
- One time disbursement fee of 5% deducted upfront
- Transparent fees. You’ll always know exactly how much you have to pay.
- No prepayment penalties. Pay off loans faster without getting penalised for it.
However, some requirements for invoice financing are applicable:
- Credit terms on the invoice must not have lapsed
- Sole-Proprietorship and Partnership are ineligible at this moment
- Key stakeholders within the business will be requested to provide personal guarantees for the loan.
How Do We Stand Out From Other Invoice Financing Providers in Singapore?
Payd by Poss does not offer an invoice financing line with a pre-approved credit limit. Instead, it considers individual invoices submitted during each application.
We understand that a lump sum repayment immediately after receiving your invoice payment would drastically impact your cash flow. Hence, we divided repayment into 3 equal amounts payable, letting you better manage your business.
Access Working Capital Solutions For Your Growing Business
Maintain smooth operations and seize new opportunities with Payd, Poss Capital’s flexible invoice financing solution in Singapore. Contact us today and get Payd with Poss in no time.
Last updated on 5 January 2024
