Business Loans

7 Benefits of Invoice Financing for Small Businesses

Lina Tay
December 7, 2022

Invoice financing is a type of loan offered to a business to help address cash flow gaps. It differs from conventional loans in the sense that businesses pledge unpaid invoices to lenders in return for quick cash. In this article, we’ll be sharing some of the benefits of invoice financing. 

1. Invoice Financing Helps Business Improve Cash Flow

The most immediate benefit of invoice financing is that it helps businesses address cashflow gaps – freeing up funds that can be used on other projects or business improvements. Having more funds available allows businesses to be ready to exploit new opportunities as they turn up instead of having to wait for customers to settle their invoices in full. 

2. Invoice Financing Requires No Collateral

Another benefit that many businesses will appreciate is that invoice financing requires no collateral. Traditional loan products typically require collateral as security, but with invoice financing, the invoice itself becomes the guarantee. 

3. With Invoicing Financing Loans, There’s Less of an Emphasis on Past Data

When applying for traditional loan products, banks and other financial institutions place more scrutiny on a business’ history. This means that businesses with either slow growth or newly launched will find it more difficult to get approved for a loan. However, with invoice financing, loans are based on the value of outstanding invoices, making it possible for a new or growing business to acquire a loan. 

4. Invoice Financing Loans Allow Businesses to Extend Payment Terms

In building good relations with customers, sometimes a business has to make concessions. Concessions, such as extending the payment terms beyond the industry standard of 30 to 90 days, which may stress a business’ cash flow. 

With invoice financing, that worry is put to rest; businesses can comfortably extend payment terms more confidently, knowing that a financing option is available. 

5. Provides a Foundation for Good Business Relationships

Invoice financing helps bridge cash flow gaps. Apart from the obvious benefits, such as employees and suppliers getting paid quicker or companies can reinvest in their operations or growth much earlier, this provides a foundation for good business relations. As a business continues to build credibility with its circle of business partners, it paves the way for more opportunities. 

6. Invoice Financing Loans Offer Instant Cash

Traditional loans from banks and other financial institutions usually require a significant amount of time before funds can be released. With invoicing financing, loans can be disbursed in as quick as a day. This is beneficial when a business needs a quick influx of cash to address business expenses. 

7. Invoice Financing Loans Allow Small Businesses to Make Bigger Purchases with Ease

One disadvantage of purchasing from larger and more established suppliers is that payment terms tend to be fixed. For a small business, this is a problem. In addition, it is likely that they will have little room or leverage to negotiate more favourable terms. With invoice financing, small businesses are in a better position to meet payment terms by larger businesses without affecting their bottom lines. 

Are you Ready to Take up an Invoice Financing Loan?

Lendingpot makes it easy for small businesses to get loans by opening them up to a wider variety of credible financial institutions with one simple application. We’ve worked to ensure our platform results in a positive loan experience. You can read more about that here. If you wish to start your application, you can do so by clicking here


Frequently Asked Questions about Invoice Financing

What do I need to prepare to apply for an invoice financing credit line?

Apart from the standard business documents like your bank statements, financials, guarantor’s NOA and CBS report. The more important documents are:

  • Receivables ageing list
  • List of buyers and the forecast purchase amount
  • Contracts or agreement with your buyer
  • Sample invoices

How long does a process of application typically take for invoice financing

Most of the time, it can take up to 1 month to get a credit line approved. This is typically due to the fact that they need to get you set up on a system as well so that you can be familiar with the operational process with the financier.

What if my customer doesn’t make the eventual payment to settle the bill?

Invoice financing services are divided into two categories: recourse and non-recourse. Non-recourse financing has higher costs, but the financier will bear the risk if the consumer does not pay. Recourse financing is less expensive, but you must purchase back invoices if they go unpaid for a certain number of days as specified in the financing agreement.

What is the maximum amount of financing I can get?

Most financiers can offer a credit limit of up to S$10 million depending on the credit quality of your end buyer.

What are the types of fees that are payable?

There is a one-time disbursement fee on each invoice and an interest fee that is charged prorated to the tenor of the financing.



Leading digital loan marketplace Lendingpot connects SMEs to its network of 45 lenders comprising relationship managers from banks, financial institutions, and private and peer-to-peer lenders in Singapore for free. It aims to help SMEs overcome the information asymmetry problem and lack of transparency prevalent in the SME financing sector by offering SMEs financing options such as business term loans, property loans, revenue-based financing, credit lines, working capital loans, bridging loans, invoice financing, and more.

Leading digital loan marketplace Lendingpot connects SMEs to its network of 45 lenders comprising relationship managers from banks, financial institutions, and private and peer-to-peer lenders in Singapore. It aims to help SMEs overcome the information asymmetry problem and lack of transparency prevalent in the SME financing sector by offering SMEs financing options such as business term loans, property loans, revenue-based financing, credit lines, working capital loans, bridging loans, invoice financing, and more.

About the author

Lina heads up all things marketing and branding at Lendingpot. With a keen aesthetic eye, she believes in the use of design to communicate with our SME community and aspires to turn Lendingpot into a household name. Out of work, she is an avid camper and appreciator of nature’s best works.

invoice financing
SMEs
SME Loan
business
business loan
Benefits
small businesses

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