Invoice Financing for Entrepreneurs

Invoice financing has traditionally been something that only large corporations have been able to benefit from. Entrepreneurs have usually had to rely on banks to fund their business. However, new service providers are entering the market, to give entrepreneurs easy access to other financing options.

Now entrepreneurs can use their outstanding invoices as collateral to balance their cash flow and secure smooth business operations. We at Zervant are offering our customers access to different financing services during the autumn of 2019, in cooperation with market-leading invoice financing service providers.

Traditionally, invoices are paid in 30 to 60 days across Europe. With invoice financing, you as an entrepreneur, can receive your money in as quickly as 48 hours. The cost for this is normally a percentage of the invoice face value. At its best, invoice financing helps businesses improve cash flow, pay employees and suppliers, and reinvest in operations and growth earlier than they could if they had to wait until their customers paid their balances in full.

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Most Common Invoice Financing Formats

There are several different ways to structure invoice financing. However, the most common forms are: invoice factoring and invoice discounting.

Invoice Factoring

Invoice factoring means that you, as an invoice issuer, will sell the outstanding invoice to a lender. The lender pays a percentage of the invoice value up front to you. The lender will then own the outstanding invoice and collect it from the payee.

Invoice Discounting

In the case of invoice discounting, you as an invoice issuer will receive a percentage (as much as 95% of the invoice total) of the outstanding invoice from the lender. However, you are still responsible for collecting the money from the payee you invoiced. Once your invoice is paid, you repay the lender.

In both cases there might be additional costs in the form of an added interest or a fee for having loaned the money in the first place.

Summary of Different Invoice Financing Formats

Invoice Financing

A form of short-term borrowing that is extended by a lender to its business customers based on unpaid invoices. Through invoice factoring, a company sells its accounts receivable to improve its working capital, which would provide the business with immediate funds that can be used to pay for company expenses. Invoice Financing includes financing forms such as Factoring and Discounting.

• Service providers: Finexkap, Fundflow

Invoice Insurance

Allows your business to insure individual invoices you send to your customers.

• Service providers: Moment

Business Loan

To qualify for a small-business loan, you may have to provide collateral to back the loan. Some service providers also provide business loans without collateral, based on the business’s credit scoring.

Service providers: Svea Yrityslimiitti, Qred, Iwoca

You can find financing services available for you in your Zervant account under the Financing tab.

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