What is Invoice Factoring & How It Works
Invoice factoring is a method in which a business acquires cash using an invoice their customer is due to pay. Since the business is getting credit the business is offered a certain percentage of all the amount due and the rest is paid once the customer makes their payments.
This is an ideal alternative for businesses seeking finance solutions to immediate needs that cannot wait for customers to make their payments such as paying employees or suppliers.
At Momentum credit we offer up to 85% value of the invoice given in cash to your business to boost your immediate financial needs in a period of fewer than 24 hours and wait for payments up to 90 days.
This is very beneficial to your business as you will continue running without any financial constraints while awaiting the payment of an invoice, this could take a lot of time.
Advantages of Invoice Factoring
Invoice factoring can provide an alternative to a business lacking immediate cash for daily operations. This could either be paying its staff, Bill or other re-curing daily operational expenses. Offering fast cash can also remove the threat of slow paying customers as the cash is facilitated by Momentum Credit Kenya before the customer has paid.
Customers who do not make payments promptly can also be given an easy time in business as the business will not have to constantly remind them to make their payments a move that could spoil the relationship between businesses as it already has the cash it needed. Momentum Credit gives the customer a period of up to 90 days making them have ample time to make the payment.
This is a win-win situation as both the business financial need is catered for in time and time is allowed to the customer to make their
payments. A suppliers business, for example, could give a retailer goods and use invoice factoring to get the cash in good time while giving the retailer time to sell the stock and pay the money back.
Invoice factoring can also save a business which does not have collateral as they cannot obtain a bank loan. As invoice factoring uses the invoice as a sole document to determine the creditworthiness of small and medium-sized enterprises (SMEs). These cannot benefit from financial loans from banks or other financial lenders to boost their business.
Invoice factoring can also help your business to grow as cash constraints which keep small and medium-sized enterprises (SMEs) from growing is moved out of the way.
Accessing invoice finance is easy
While other finance methods require a lot of paperwork and procedures, invoice factoring is easily accessible and this makes it convenient for most small businesses.
Moreover, sing momentum Credit to access invoice factoring services is made easier as you give them a call and get the cash within a period of fewer than 24 hours. This also comes with an advantage as you do not need to open an account to access this services.
Cheaper than a Loan
While most bank loans charge interest of up to 14.5% in Kenya, invoice factoring may charge you as little as 5% for the credit extended to you. This is because you get a certain amount of the value of your invoice, then after the customer makes the payment you are paid the remaining amount. Because this is a loan, however, you will receive a deficit of a certain percentage as agreed upon effect.
Momentum Credit offers you up to 85% instant cash on your invoice meaning you can get access to nearly all the cash on your invoice even before your customers pays for it.
Invoice factoring Vs invoice financing
Invoice financing is more expensive; getting a loan while using an invoice is quite costly as you can be charged interest on the loan yet you have not even received any payment or profit from the invoice. Slow payments may also mean paying penalties as the loaner may not understand that your customer has not made your payments.
Invoice factoring is also more accessible as banks and other financial institutions may require you to have a physical asset such as real estate to offer you invoice financing yet in invoice factoring you can get cash using only your invoice.
While more and more business begins to start in Kenya, Invoice factoring may just be the solution to their financial needs. Momentum credit will also remain key in playing a major part in providing for this solution making it easier to start a business and watch it grow. This will not only provide solutions to small and medium-sized businesses growth but also shape the financing sector as a whole as this will trigger competition which is healthy in the business environment.