Invoice Financing for Small Businesses

With technological advancements and increasing internet accessibility, many new and unconventional financing options have emerged. Nowadays, businesses don't rely on formal financial institutions like banks to receive credit.

*The minimum investment is Rs 3 Lakh

Please fill all the fields

Principle

Interest

Tenure

Tenure in days 30 60 90 120

Result

Principal Invested:

Interest Earned:

Tota Earnings

Calculate

The increasing popularity of fintech platforms has opened up a vast array of opportunities for businesses, especially the MSME sector. Invoice financing is one such option that helps a business maintain its cash flow requirements.

What Is Invoice Financing?

In invoice financing, businesses use their unpaid invoices to borrow money from lenders to meet their short-term liquidity needs.

Businesses usually sell their products to large customers, like retailers and wholesalers, on credit. However, this may cause issues with working capital during this period. To solve such problems, they can easily opt for invoice financing. Unpaid invoices fall under accounts receivable, meaning that the company will receive the payment later.

Different Types of Invoice Financing

Now, let us understand the different types of invoice financing:

• Invoice Discounting

  In invoice discounting, businesses use their unpaid invoices to borrow money from third-party lenders. The responsibility to collect payments from customers lies with the business itself. After receiving payments, the business needs to repay the lender along with an interest/fee.

  The fees charged by lenders are slightly less than invoice factoring as there are no due diligence charges. The financial strength and reputation of the business are determining factors based on which the financial transaction takes place.

• Invoice Factoring

  Here, a business sells unpaid invoices to the lender and receives the requisite amount. Lenders usually offer most of the invoiced amount as credit and disburse it immediately. Then, the lender will collect payments from the buyers directly and remit the rest of the invoices to the business.

  The expenses associated with this financing option are slightly higher as the lender includes due diligence charges to assess a customer's creditworthiness. Another feature of this financing option is that customers will know that a third-party lender collects the due money, not the original seller.

Benefits of Invoice Discounting

Listed below are the benefits of invoice discounting for businesses:

• Business relationships can continue as sellers don't have to inform buyers that they are using invoice discounting to meet their working capital requirements.
• Businesses can use the money obtained through invoice discounting for various purposes, such as expanding their venture, hiring recruits, purchasing new equipment, reducing debts, and fulfilling working capital needs.
• It helps to accelerate the cash flow of a business and helps in the quick realisation of its outstanding dues.
• This invoice financing option removes the hassles of chasing payments.
• It helps businesses to make their payments quickly.

KredX is India’s largest supply chain financing solution provider. We help businesses unlock the potential of their unpaid invoices and receive money in no time.

Bottom Line

Invoice financing is becoming an increasingly popular financing option that helps a business meet its short-term capital requirements. In India, MSMEs have always found it challenging to borrow money from banks primarily because they do not have the documents or collateral.

KredX leverages advanced technology to solve the immediate financial requirements of a business. It is our responsibility to solve your working capital requirements.