In today’s dynamic business landscape, securing the right kind of funding is crucial for maintaining
operations, fuelling growth, and ensuring sustainability. Business owners often find themselves at a
crossroads, deciding between various financing options. Among these, invoice finance and online
loans are two popular choices. While both have their merits, a Fifo Capital invoice finance facility
often stands out as the superior option for many businesses. Here’s why.
Understanding Invoice Finance
Invoice finance, also known as accounts receivable financing, allows businesses to leverage their
outstanding invoices to obtain immediate cash flow. Instead of waiting 30, 60, or even 90 days for
customers to pay their invoices, businesses can “sell” these invoices to a finance company, like Fifo
Capital, at a discount. This provides immediate access to funds that can be used to cover operational
expenses, invest in growth opportunities, or manage unforeseen costs.
The Benefits of Fifo Capital Invoice Finance Over Online Loans
1. Improved Cash Flow
Cash flow is the lifeblood of any business. Invoice finance ensures that businesses maintain a steady
flow of cash, which is crucial for day-to-day operations. Unlike online loans, which add debt to the
balance sheet and require fixed repayments, invoice finance converts sales on credit into immediate
cash. This helps businesses manage their working capital more effectively.
2. No Additional Debt
One of the most significant advantages of invoice finance is that it does not add debt to the
business’s balance sheet. Traditional loans, including online loans, increase the company’s liabilities
and can affect its credit rating. Invoice finance, on the other hand, is an asset-based funding
solution. This means businesses can improve their cash flow without increasing their debt levels,
making it a more sustainable and attractive option.
3. Flexible and Scalable
Invoice finance is inherently flexible. The amount of funding a business can access grows with its
sales. As a business raises new invoices, it can generate more cash through invoice finance. This
scalability is a key advantage over traditional loans, where the funding amount is fixed and may not
align with the business’s evolving needs.
4. Quick Access to Funds
The application and approval process for traditional and online loans can be lengthy, often involving
rigorous credit checks and documentation. In contrast, invoice finance via Fifo Capital offers a
quicker turnaround. Once the invoices are verified, funds can be made available in as little as 24
hours. This speed is crucial for businesses needing immediate access to capital.
5. No Need for Perfect Credit
Online loans typically require a good credit score for approval. For many small and medium-sized
enterprises (SMEs), maintaining a perfect credit score can be challenging. Invoice finance relies on
the creditworthiness of the business’s customers rather than the business itself. This makes it an
accessible option for companies that may struggle to secure traditional financing due to less-than-
perfect credit.
6. Focus on Growth, Not Repayment
With traditional loans, a significant portion of a business’s revenue goes towards repayment, often
over several years. This can strain the company’s finances and hinder growth. Invoice finance allows
businesses to focus on reinvestment and expansion without the burden of monthly loan
repayments.
7. Professional Credit Management
Many invoice finance providers offer additional services such as credit management and collections.
This can be a significant benefit for businesses, as it reduces the administrative burden of chasing
payments and managing receivables. Professional credit management ensures timely collections and
allows business owners to concentrate on core operations.
The Drawbacks of Online Loans
While online loans can provide quick access to funding, they come with several drawbacks that can
impact a business’s financial health in the long run.
1. High Interest Rates
Online loans often come with higher interest rates compared to traditional bank loans. These rates
can significantly increase the cost of borrowing, especially for SMEs that may already operate on thin
margins.
2. Fixed Repayment Schedules
Fixed monthly repayments can be a challenge for businesses with fluctuating cash flows. Missing a
repayment can lead to penalties and negatively impact the business’s credit score.
3. Short-Term Solutions
Online loans are typically short-term solutions. While they can address immediate financial needs,
they do not provide the ongoing cash flow support that invoice finance offers.
4. Impact on Credit Score
Applying for multiple online loans can negatively affect a business’s credit score. Each application
typically results in a hard inquiry on the business’s credit report, which can lower the score and
make future borrowing more difficult.
To Conclude…
For businesses seeking a sustainable and flexible funding solution, invoice finance is often a better
option than online loans. It provides immediate access to cash without adding debt, supports growth
through scalability, and offers professional credit management services. By leveraging outstanding
invoices, businesses can maintain healthy cash flow and focus on their strategic objectives.
For more information about various available options and what’s best for you, give us a call – 0800
863 436, or email us at [email protected]. We would love to hear from you.