Small business owners are often faced with a dearth of working capital, which can compromise their operations significantly. If you have faced such an issue in your enterprise, you would know how difficult it can become to ensure efficient supply chain management under this situation. Insufficient working capital also means that you cannot pay your workers on time, causing additional hindrances.
Even though traditional lenders might reject credit applications from your small-scale business, opting for a bill discounting facility may be your best bet in these circumstances.
KredX is a leading integrated cash flow solutions provider, allowing businesses to utilise their unpaid invoices to gain quick access to working capital. However, before you can appreciate the benefits of bill discounting, you first need to understand the basics of invoice financing.
What Is Invoice Financing?
Invoice financing entails the process of raising funds against an unpaid invoice. If your business has an invoice due, you can leverage it, and acquire financial assistance whenever necessary. The financier will pay you a certain percentage of the outstanding amount, generally ranging from 70-90%.
Invoice financing has two primary types, namely, invoice or bill discounting and invoice factoring. Here is what these two kinds represent –
- Invoice Or Bill Discounting – In this form of finance, you and your company retain full control of the invoice or ledger, against which the funding is issued. This means you would need to collect the dues from clients or customers, before passing the pertinent sum to the service provider.
- Invoice Factoring – In this specific process, your company would need to surrender control of the outstanding ledger to your financer. The factoring service provider is liable, in such cases, to collect the due payments from your customers.
Benefits Of Bill Discounting For Any Small Business
Working capital deficiencies can disrupt the flow and profitability of any business. Nevertheless, smaller companies are the most affected when such financial troubles present themselves.
Bill discounting is an efficient way to handle cash inadequacy, without any collateral hypothecation.
Immediately Converts Receivables Into Cash
While bigger companies have enough flexibility when it comes to cash flow, smaller businesses have extremely limited liquidity to deal with their unpaid invoices. Invoice discounting will help your business unlock its potential, by instantly converting all your outstanding receivables into cash.
Handling Cash Flow Issues Without Resorting To Traditional Business Loans
Small businesses may find it challenging to avail of a typical business loan from banks or financial institutions.
Even when you succeed in acquiring such advances in a small business, they may be available against unfavourable terms, increasing your financial burden in the long run. Bill discounting facility, on the other hand, is much more readily available to such businesses, at profitable terms.
Quick Financing Solutions
Since this facility does not require you to pledge any collateral, it is often faster than traditional forms of lending.
Therefore, your business can opt for an invoice discounting facility whenever there is an urgent need for cash. The next time you find it difficult to pay your employees, or maintain an efficient flow of working capital, arrange for an invoice financing option and prevent the delays.
Simple Repayment Process
Another crucial advantage of the bill discounting facility is that your company can decide to service it in a bullet repayment.
Bullet repayment refers to repaying the entire due amount through a single lump-sum payment, instead of servicing installments to the lender. This flexibility of payment can go a long way in reducing the financial burden.
Focus On Business Growth
Under normal circumstances, small business owners fail to implement most of their plans due to a lack of funds. Bill discounting eliminates these limitations, allowing you to focus solely on the different avenues for business growth. For instance, you can expand your operations with the additional funds available through bill discounting.
KredX offers invoice discounting services that allow businesses to avail of working capital, thereby reducing cash flow shortages. The convenience of availing of these services can be a boon for smaller companies, struggling with maintaining working capital. You do not need to meet stringent criteria to opt for these types of finance.
Smaller companies face a constant deficiency in their working capital. A bill discounting facility can help resolve such issues without burdening the business, with considerable debt. With such benefits, the funding option can be extremely convenient for small-scale enterprises.