What Small Business Owners Need to Know About Invoice Financing

invoice financing

Ask any small business owner, and they’ll tell you the same thing: cash flow problems practically come with the territory. Every now and again, small business owners in all industries—including those who operate cleaning, services, and lawn care companies— encounter cash shortages. In fact, a recent study revealed 60% of small business owners worry about cash flow every month.

There are a number of reasons small businesses are forced to deal with cash shortages. You can’t exactly drive to a client’s house or office to clean it if weather conditions are bad. Your prized lawn mower could be on the fritz, causing you to incur unexpected repair expenses. The list goes on.

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One of the main reasons small businesses encounter cash flow problems is because their customers don’t pay their bills on time. In fact, research by Fundbox revealed 64% of small businesses routinely wait for late payments to trickle in.

While a padded receivables account might look great on your financial statements, you still need cash to grow your business. The good news is that thanks to invoicing financing, you can put your unpaid invoices to work for your business and overcome cash flow problems with ease.

Not familiar with invoice financing? Here are three things every small business owner should know about the modern method of small business funding.

1. Invoice financing allows you to borrow against your own assets

When cash is low, you can always apply for a loan—but you need to be ready to take on debt and put up collateral. There’s no sense in adding to your liabilities if you have a stack of unpaid bills you’re waiting to collect. With invoice financing, you won’t have to.

Quite simply, invoice financing allows you to borrow against your unpaid invoices. Create an account with an invoice financing service, link your accounting or business management software to it, and then select which outstanding invoices you want to advance payments on. The full invoice amount will then be deposited into your bank account in as little as one business day, and you’ll have a period of time—usually between 12 weeks and 24 weeks—to repay the advance, plus a small fee.

The end result? You don’t have to take on any long-term debt to solve your cash problems.

2. Invoice financing services won’t bankrupt your business

From small business loans and invoice factoring solutions to merchant cash advances and everything in between, there are a number of financial instruments small business owners can use to overcome cash shortages. However, unlike those legacy funding vehicles, invoice financing is not expensive—quite the contrary.

For example, clearing a $1,000 invoice with Fundbox will cost you between $52 and $82 over a 12-week period, depending on your business’ financials. If you pay back the advance ahead of schedule, any remaining fees will be waived.

3. Unlike factoring, your customers won’t learn of your cash woes

Small businesses with cash flow problems could always sell their unpaid invoices to factoring companies at a discount. By doing so, however, the factoring company takes ownership of the invoices—and collects payment directly from the small business’ customers.

Invoice financing solutions, on the other hand, exist totally in the background. They don’t come between you and your customers at all. In fact, customers won’t find out you’re using an invoice financing service unless you tell them yourself.

Interested in invoice financing for your business? Jobber’s integration with Fundbox gives Jobber users a new and efficient way of closing cash flow gaps.

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