Despite the fact that the alternative finance market is tailored largely towards the needs of SMEs, there’s no reason why the concept should not be embraced by larger enterprises.
As the movement towards blue chip selective invoice financing (SIF) gathers drive, we’re exploring the benefits of ‘alt-fi’ for big business, and the exciting new opportunities on offer.
Selective Invoice Finance, defined
As a form of alternative lending, selective invoice financing is a flexible way for businesses to unlock access to cash in arrears, via a third party provider. It’s fast, easy and convenient, with suppliers simply submitting an invoice to service providers like Global Asset Finance Limited and its partners, then receiving an advance worth up to 85% of the total invoice value. When the customer coughs up the business is sent the final 15%, minus a small service fee.
A SME centric solution
Small businesses are the backbone of the British economy, yet when it comes to playing fair they’re continually bullied by their blue-chip counterparts. Long payment terms are becoming a nationwide crisis, with the latest stats from Tungsten Network estimating that 12% of SMEs regularly wait more than 90 days before getting paid.
As cash flow is critical to SME success, an increasing number of entrepreneurs are starting to embrace the radical new options that allow them to bridge the gap between raising an invoice, and receiving payment. This cash in arrears is often the key to triggering growth, which makes Selective Invoice Finance a smart, alternative to banks which aren’t always willing to fund SMEs.
Selective Invoice Finance also alleviates concerns over whether or not a business can afford to take on big contracts, and allows SMEs to accurately predict and plan their cash flows, as opposed to relying on volatile payment practices from big debtors.
So essentially, Selective Invoice Finance allows entrepreneurs to inject capital into their business, sell with confidence, plan for the future and accelerate growth.
Selective Invoice Finance re-imagined as a blue chip friendly service
As covered above, selective invoice finance unlocks a host of fiscal benefits for SMEs with limited capital. But what about their blue chip counterparts? As the alternative lending industry gains momentum, Selective Invoice Finance is emerging as an increasingly astute choice for larger companies.
The concept is called reverse factoring, or supply chain financing. Basically, it sees third party providers like Global Asset Finance Limited and its partners interpose between a company and its suppliers. The relationship ensures that invoices distributed to the ordering party are paid at an accelerated rate.
This helps suppliers efficiently finance their receivables, and allows the ordering party to leverage lower interest rates than what they would normally be offered. Buyer benefits include improved supplier relationships, augmented reliability and zero requests for early payment. Costs can also be reduced via increased liquidity, and improvement to day’s payable outstanding are marked.
Essentially, it’s a collaborative and mutually beneficial arrangement, and allows both parties to maintain healthy cash flow. So, while Selective Invoice Finance is largely targeted at the SME economy, reverse factoring is also emerging as an innovative alternative for larger blue chip companies.
Selective Invoice Factoring