Invoice Financing

Delays in customer invoice payments can disrupt essential cash flow and hinder your business operations. Invoice financing offers a solution by turning your unpaid invoices into immediate working capital.

Whether you need funds to pay employees, purchase inventory, or handle everyday expenses, this financing method gives you the flexibility to grow your business. 

Invoice financing is a short-term credit facility that allows businesses to borrow money using their unpaid customer invoices as collateral. Instead of waiting weeks or months for payments, companies can access a percentage of the invoice value instantly.

Invoice financing helps you manage cash flow gaps, meet urgent financial needs, and improve operational efficiency with minimal risk.

Invoice financing can be a powerful tool for businesses facing delayed customer payments. Here are some of the benefits:

• Flexible Funding

Unlike traditional loans that provide a fixed amount, invoice financing allows you to draw funds gradually. This flexibility ensures you always have money when you need it.

• Improves Cash Flow

You can access up to 90% of your invoice value almost immediately, giving you quick liquidity. It helps manage everyday expenses such as salaries, rent, and utilities without waiting for customer payments.

• No Collateral Required

You do not need to pledge property to secure the funds. The invoices themselves act as collateral, making it accessible to businesses without significant assets.

• Supports Continued Sales

The advance funding helps you take on and fulfil new orders without cash flow constraints. It helps maintain your sales momentum by removing cash flow constraints.

• Frees up Working Capital

Unlocking funds from unpaid invoices allows you to meet operational needs. It boosts your ability to invest in inventory, marketing, or staffing without additional borrowing.

• Saves Time

Chasing overdue payments can be time-consuming. With this financing, you reduce time spent chasing payments and can focus on core business activities.

Here are the two types of invoice financing available for businesses:

• Invoice Factoring: Invoice factoring involves selling your unpaid invoices to a lender, who advances you most of the invoice amount and collects payment directly from your customers.

• Invoice Discounting: Invoice discounting is a type of financing where you collect the payments yourself. Your customers do not know you are using the invoices to get money. You borrow against your invoices but stay in control of your customer accounts.

Invoice financing helps businesses get quick access to cash by unlocking the value of unpaid invoices. Here is how invoice financing works:

1.Submit the Invoice to a Lender

You send your unpaid invoice to a lender. The invoice should be for goods or services delivered, with payment due within the agreed time frame.

2.Receive an Advance

Once approved, the lender provides a large portion of the invoice amount, up to 90%. It helps you get immediate cash without waiting for the customer to pay.

3.Customer Makes the Payment

You collect the payment from your customer as usual. Your customer pays the full invoice amount to your business.

4.Repay the Lender

After the customer pays you, you return the advance to the lender, along with a small service fee or interest. You can keep the remaining balance with you.

Here is an example of invoice financing:

1. The invoice is submitted: Suppose your business issues an invoice worth ₹4 Lakhs with a payment term of 45 days. You approach a lender and submit this invoice to get early funds.

2. Lender provides funds: The lender approves your invoice and offers you 85% of the invoice upfront, which comes to ₹3.4 Lakhs. This gives you working capital without waiting 45 days.

3. Fee is applicable: The lender charges a 1.5% weekly fee until the customer clears the invoice. If the customer pays after three weeks, the total fee will be ₹1.8 Lakhs (1.5% of ₹4 Lakhs x 3 weeks). Meanwhile, you continue to collect the payment from your customer as usual.

4. You repay the lender: Once the customer pays the full invoice, you repay the lender ₹3.4 Lakhs + ₹1.8 Lakhs = ₹35.8 Lakhs. The rest, ₹4.2 Lakhs, stays with your business.

Invoice financing is structured in two ways. Both offer different levels of control, visibility, and cash flow access.

Invoice Factoring

• In this method, a business sells its unpaid invoices to a lender and receives up to 85% of the invoice amount right away.

• The lender then collects payment directly from the customers.

• Once the full amount is received, the remaining 15% to 30% is returned to the business.

• Since customers deal directly with the lender, they know the business is using invoice financing, which may impact the business's image or reputation.

Invoice Discounting

• The business borrows money using its unpaid invoices as collateral, but continues to collect payments from customers on its own.

• Lenders typically advance up to 95% of the invoice value.

• After collecting the payment, the business repays the lender, including any interest or fees.

• The customers are unaware of the financing arrangement, keeping the process discreet.

Applying for invoice financing online is quick and easy. Just follow these simple steps to get started on Bajaj Markets:

1. Tap on the ‘Apply For Loan’ button on this page

2. Select your profession, mobile number, and pincode

3. Verify the contact number with the OTP sent to your phone

4. Accept the terms and conditions after reading them carefully

5. Click ‘CHECK YOUR OFFER’ and wait for the next steps