Why use invoice finance over traditional business loans


If you’re a business owner, then you know that running a business requires a lot of money.

You need to purchase inventory, pay employees, and cover other costs associated with operation.

This can be difficult if you don’t have the capital available to do so.

Traditional business loans can be a great way to get the money you need, but invoice finance can be a better option in some cases.

Here’s why:

1. You don’t have to wait long for approval.
2. You can get the money you need without putting your assets at risk.
3. There are no monthly payments; you only pay when you get paid by your customers.
4. It’s an affordable solution that can help improve your cash flow.

Invoice finance versus a business loan

Invoice finance is really just a business loan in the sense that it allows you to borrow money against your outstanding invoices.

Unlike traditional business loans, invoice financing does not require any collateral and can be obtained quickly, making it a very attractive option for businesses looking to expand or improve their cash flow.

Additionally, this type of business funding allows you to take advantage of early payment discounts from your suppliers, helping you to improve your overall business margins and boost revenue.

Whether you need fast access to working capital for growth or simply want to free up cash that is tied up in unpaid invoices, invoice finance can be an excellent solution for businesses of all sizes looking to achieve their financial goals.

So if you’re looking for a funding that can help you achieve your growth goals and unlock additional business opportunities, then invoice finance is certainly worth trying out.

How invoice finance is changing

Traditionally invoice finance has been the go-to to provide businesses with an alternative source of funding when they are facing cash flow issues.

Accessing advance funds to help pay suppliers or staff wages, the business only uses the funds as a short-term solution, enabling them to continue trading without having to cut their losses — or potentially even go out of business altogether — due to lack of funding.

But what’s becoming increasingly popular is for businesses to use invoice finance as an always on funding tool, often in combination with other working capital solutions — e.g. supply chain finance and trade finance — in order to open even more benefits like supplier and early payment discounts, improving the overall margins and return.

Invoice finance can work effectively in combination with more traditional types of finance, like your existing business loans.

Why invoice finance is a more fit for purpose finance option for business


Invoice finance can cover those last-minute or emergency expenses — think travel, legal or professional fees, equipment repairs or replacement. It can also be incorporated into your daily operating structure to help you achieve your broader business strategy. You might use your facility to provide for staff salaries, training and education, or scheduled equipment upgrades.

It’s this flexibility that makes invoice finance a popular choice for business owners when managing fluctuations in cash flow.

Fast approval

One of the advantages invoice financing has over traditional bank loans is how fast you can access the funding.

With fast approval and fast payment you ensure greater business continuity (and a significant load off your mind).

Off-balance sheet financing

Invoice finance is a type of off-balance sheet financing.

This is a common accounting practice that keeps certain assets or liabilities off your balance sheet. And everyone loves a healthy balance sheet. It can attract investors or lead to cheaper borrowing costs. Meanwhile, you get the funds you need to keep growing your business.

De-risk late customer payments

The flow on effects of late payments to your business can be significant. They can cause the breakdown of relationships between you and your staff and suppliers. It can wreak havoc on your plans for business growth.

Invoice finance reduces that risk. It delivers surety of cash flow in uncertain times and allows business continuity.

Maximise your cash flow

Knowing you have cash at hand is a massive advantage when planning your business activities.

You can use it for the immediate payment of expenses (predicted or otherwise), or invest it into what will help your business grow over the long term.

That doesn’t just alleviate pressure on your business, it lessens the psychological burden on the conscientious business owner who puts their staff and suppliers first.

Debtor insurance

Despite best efforts, businesses fail. The impact of an insolvent business isn’t just felt by the owners and their employees.

When a small business goes under, the ripple effect can reach other local businesses and suppliers. When a large business fails, the destructive waves can be felt in industry across the globe.

This scenario plays out daily as supply chain issues heavily impact trade the world over.

Debtor insurance, which is an option when you take out invoice finance with Fifo Capital, acts as a levy protecting your business in the event your customers become insolvent.

The insurer pays your customer’s outstanding invoices to you, so you can avoid the worry of lost income.

Keep funds rolling

Of course, establishing a way to access fast funds before you really need it, makes good business sense. Particularly when a business is needing more, and larger amounts of funding.

Businesses will often start by using selective invoice finance before they move to using whole of book invoice finance, which enables the business to access a line of credit.

Once a business starts to see the benefits and how much stronger the business is, by having access to extra funds to draw on, then the cost to access the advance funds becomes not as important as the extra return it can potentially deliver.

By establishing a rolling amount of cash to access through a line of credit, this enables you to plan better and to pivot as required.

Make your working capital work

Now more than ever, Australian business owners are looking beyond traditional bank loan products to solve their cash flow concerns.

Invoice finance is a low-cost, highly convenient way to keep the cash coming in — powering your business. And it’s just one of the ways you can use working capital solutions to improve your cash flow and your business.

To discover how working capital solutions can help your business, book a free 15-minute consultation with a solutions specialist.

Subscribe to our newsletter

Keep reading

Fifo Capital Receives Major Awards at the WeMoney Business Awards 2022

Fifo Capital is proud to announce that it has won two major awards at the WeMoney Business Awards 2022: the Best Business Loan Award and the Best Trade Finance Award. The WeMoney Business Awards recognise excellence in business finance. This year, Fifo Capital was chosen from a competitive field of contenders for its exceptional customer […]

View more

Finance tips for business owners

Running a business is a challenging and rewarding endeavour. It requires careful planning, financial management, and the ability to adapt to changing circumstances. Here are some tips for business owners and finance advisers who want to improve their skills and knowledge: Develop a solid business plan A well-written business plan outlines your goals, target market, […]

View more

For brokers: Help your clients secure the funding they need

As a broker, you play a critical role in the success of your clients. The biggest challenge faced by SMEs today is securing the necessary funding to grow and prosper. However, with traditional finance options becoming less popular, it’s important for brokers to be well-versed in alternative finance solutions. In this article, we provide you […]

View more