Minimise Unsecured Business Lending with Invoice Discounting

In today’s dynamic business climate, successful cash flow management is essential, and business financing makes up for any deficits in it. Bill discounting assumes pertinence, especially when unsecured business lending becomes copiously available to such businesses, which have a steady inflow of good creditworthiness customers.

The following blog discusses unsecured business lending and Bill discounting. It also explains the benefits of bill discounting as one of the most strategically planned methodologies for cash flow management.

Unsecured Business Lending

In unsecured business lending, flexibility is involved, but there are some limitations. Some of the more notable drawbacks are

Lengthy Application Process: The process related to the application for unsecured business lending is normally quite long. Mostly, lenders will need a comprehensive business plan, financial statements, and often even a look at the borrower’s personal credit history in order to check on creditworthiness and ability to repay. This rigorous review process delays access to crucial funds, sometimes running into weeks or even months, especially for businesses that face immediate cash flow challenges.

More so, Bill Discounting is a much faster and cleaner process. This process entails only the analysis of the quality of outstanding invoices.

Relying on history of credit: To a more significant extent, qualification for unsecured business lending will increase reliance on the total credit history of borrowers. Thinly filed businesses or recent blemishes or those with non-established financials by themselves have it very hard to qualify or charge very unfavourable terms with a high interest rate. This can create a high barrier to entry for startups or young businesses that may not yet have a substantial credit footprint. Though bill discounting is less concerned with credit history, it will always be available to companies of a newer age in credit history so long as the customers have a good reputation for timely payments.

Fixed or Variable Interest Rates: Most of the unsecured business lendings carry a fixed or variable interest rate. These rates may be huge, thus affecting the consequent fee for borrowing. Your creditworthiness and the loan terms determine the interest rate you get. In case your business has a limited credit history, interest rates on unsecured business lending may be exorbitant. On the reciprocal side, this direct counterpart of Bill discounting, on the other hand, uses a very open fee structure. Rather than an interest rate, a percentage of the invoice value makes up a one-time discount fee, which greatly aids in easy budgeting and cost predictability. 

Long-Term Debt Liabilities: The repayment of unsecured business lending can range from 1 to 5 years. Though it’s an added advantage that it gives flexibility to your cash flow, the debt liabilities are extended as such. This potentially may, at times, be an overriding factor, more so for businesses where the cash flow requirements are only short-term. Bill discounting, meanwhile, provides short-term finance, which usually matches the invoice’s anticipated payment date, which is generally up to 90 days. This thus allows you to bridge through a short gap in the cash flow requirements without the need to stretch your debt maturities over a multiyear timeline.

Invoice Discounting: A Simplified Approach to Financing

Unlock Hidden Capital: Outstanding invoices represent a huge amount of capital tied up in your business. Invoice Discounting allows you to release this potential that is in hiding and turn it into immediate cash flow. For those of you with slow-paying customers or stretched-out payment cycles, this will be particularly useful. Access to this already available capital will assist in growth initiatives, take advantage of unexpected opportunities, or keep that cash flow buffer healthy through slow periods.

Amount Flexibility : Unlike unsecured business lendings that come in envisaged amounts, bill discounting affords the flexibility in the amount that you can borrow. You can discount one invoice, some invoices, or all your outstanding accounts receivables; you can then have flexible financing tailored towards your cash flow needs.

Reduced Debt Reliance: Invoice discounting does not work like normal debt financing. Instead of incurring long-term debt obligations with interest payments, you pay a one-time discount fee for early access to cash. This might be a good way by which it’s fairly more manageable for a business that is overly cautious about building up a huge debt burden in general.

Improved Supplier Relationships: Since the factoring company pays you immediately for invoices, you can likely negotiate better payment terms with your suppliers. As such, now you will know that with the turn of a spigot, instant cash flow turns on, and you can take advantage of early payment discounts that your suppliers offer. It increases your profitability even more.

Scalable Growth: Invoice discounting is a scalable funding solution that grows with your business. The more you increase your sales volume and the more invoices you generate, the more you can continue to use the discounting mechanism to access more working capital and support all your operations and expansion without the rigidity that comes along with traditional loan structures.

Kredex Invoice Discounting: Attractive Solution. By leveraging the power of your quality invoices for creditworthy customers, you can get immediate cash flow without some of the potential hassles of unsecured business lending. The process is simplified with a focus on making it work for the quality of your invoices and the creditworthiness of your customers, making it easier to qualify even with a newer credit history for your business. Kredex Invoice Discounting comes with a clear and transparent fee structure without any societies or the pressure of long-term debt.

Tap into the potential of your invoices today and experience the power of bill discounting.

Unlike unsecured business lendings that carry lengthy application forms and hinge on credit history, Kredex provides a much faster and simpler solution through bill discounting. We can help turn your sales invoices into cash and give you the peace of mind to take opportunities and challenges in your stride with your head up high.

Kredex provides a more formalised invoice discounting process, competitive rates, and the best quality service proposition. Reach out to Kredex to find out more about how invoice discounting may be a strategic alternative to unsecured business finance and how we could fuel growth for your business!