How Invoice Financing Can Help With COVID Recovery Efforts?

COVID has drastically weighed the global trade economy down. Its economic fallout has caused businesses to resort to finding different solutions to help survive. It’s still too early to know for certain if these solutions are enough for a smooth recovery once restrictions are lifted. Relying on governmental support will not be enough to boost economic productivity. Companies must seek cash flow alternatives such as invoice financing for secured footings.

What Is Invoice Financing?

Invoice finance refers to the process of financing outstanding invoices instantly. This allows companies early access to cash. Invoice payments often meet serious delays. With COVID going around, your customers are perhaps under similar financial strains. You mustn’t be surprised if invoice payments start taking longer than usual. Invoice based financing can help businesses to ensure expedient access to funds that are otherwise withheld or put in limbo for various reasons.

Certain companies, such as Fifo Capital, allow businesses to secure payment for their outstanding invoices upfront without having to wait around for the customers to pay. Exchanging an invoice with Fifo, could allow you to receive around 80% of the invoice’s value in cash within hours of the exchange. The remaining fund is released by the company after the payment is made by the customer.

Invoice financing for small businesses is a lot more convenient than borrowing a loan. This is because it doesn’t put your business under any additional liabilities. 

Will Demand For Trade Finance Increase?

While businesses are looking forward to a quick recovery, there may not be enough trade finance to supply the kind of cash flow necessary to jumpstart routine trading.

B2B vendors have had to put up with incredible disruptions to their cash flows. These disruptions have led many such vendors into a state of stifled cash, which has created difficulties in supporting investment finances. 

Trade finance can play a key role in saving companies from this dilemma. Immediate access to funds from a third-party servicer mitigates payment risks between suppliers and customers by financing receivables earlier. Trade finance can thus surface as an important agent in the mission of global economic recovery. However, demands for it may increase, at least in the initial periods of economic recovery.

Gianluca Pizzituti, CEO and Co-founder of Velotrade, one of the leading invoice financing companies, is hopeful of the positive role that finance companies can play in helping B2B vendors decrease risks of mitigated cash flows. 

Speed Up Recovery

The lockdown has forced many businesses into taking out a substantial amount of debt. This negatively impacts the credit scores for these vendors who are already struggling with the shortage of cash flows. Recovery can be tricky for B2B businesses since most of their finances have been in dramatic flux. 

For a meaningful recovery, businesses will have to scale back their finances and trading to levels of significant profit. Accomplishing this during the immediate aftermath of the pandemic won’t be easy by any means, especially without the mediation of quick external financing. Fortunately, there’s a way to get around this obstacle.

Invoice finance solutions such as invoice discounting, invoicing software, and supply chain management can allow businesses to leverage quick funding for easy escalation. With the immediate cash at their disposal, businesses can facilitate financial growth without affecting their overall credit score. For this reason, payments that are secured on outstanding invoices won’t affect your ability to attract investments. Access to investments will ultimately boost a quicker recovery.

Why Choose Credit Free Financing

The biggest advantage of invoice discounting is that your debt-to-equity ratio remains unaffected. Apart from the instant cash accessed through invoice discounting, businesses can simultaneously make use of the credit and attract additional investment. 

In the end, a business must hold discussions with the accountants and financial experts on which financing tool can serve their business in the best way possible.

Conclusion

The pandemic has impaired the ability of many B2B companies to attract investment and sustain positive cash flow. The real test, however, will be for these companies to retain a footing in the trading market once the restrictions are completely lifted and routine business activities resume.

COVID-19 might end paper invoicing for good but it also paves the way for utilizing related financing means. It’ll be imperative for businesses to supplant traditional financing measures with newer financial tools such as invoice financing. These upgraded methods will help boost profitable scalability in the shortest amount of time possible.