What is Cash Flow Finance ?
The ability to maintain cash flow is vital for any business operation. But since we don’t live in a perfect world, there is always something that makes businesses struggle for revenue to help them run their operations smoothly. One possible business hardship scenario is invoices that are not scheduled to be paid by the time these businesses need some cash to pay for their necessary expenses, such as paying salaries, buying office supplies or to purchase raw materials. Cash flow finance could really come in handy at such situation.
Cash Flow Finance that also commonly known as receivable finance, debtor finance, or sales finance is a loan given to a business based on the amount of cash flows they expect to receive from their invoices in the future by giving the debtor an agreed portion of their receivables.
Cash flow finance can grant you the amount of up to 80% of the value of your invoice within 24 hours. But before the debtor can release the fund, you need to give them a copy of the invoice. The outstanding debt will be collected by the debtor, and when your customer has paid the invoice, the debtor will pay the remaining percentage of the invoice’s value to you, less a service fee.
The best thing about this type of financing is that it can guarantee your business has a smooth cash flow at an ideal rate according to your needs. Also it’s a much safer way of business funding when compared with an asset-backed loan, where you are risking to lose the company’s assets when you fail to make the payment.
With an ongoing supply of cash, your business will grow faster, and the good thing is, as your business grows, the amount of funding available to you will also grow.
Even though cash flow finance is mainly used for working capital, it can also be used in various situations, including to support for business turnarounds, or to fund business acquisitions and management buy-outs. Whether your business is a sole trader, a publicly listed company, a propriety limited, a family trust or a partnership, you can always take the benefits of cash flow finance to help your business stays afloat and grows faster.
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