Getting a financing option for your business is one of your design agency’s most important decisions. It gives you enough cash flow to run daily operations, pay for marketing and advertising, pay wages, and expand your business. Financing options such as bank loans or equity financing are available. Still, invoice finance is an untapped opportunity since it provides quick access to cash and offers repayment flexibility.
Invoice finance involves selling your outstanding invoices to get the cash you need immediately. Some also call this a factoring loan because the lender, called a factor, provides a percentage of the money, such as 90% of the invoice owed by the customer. Once the customer pays the invoice, you’ll receive the remaining percentage minus the fee the factoring company charges.
As a design agency, invoice financing is an excellent option for your business, and you should consider it for the following reasons:
No Monthly Repayments
Table of Contents
One of the most pressing financial issues affecting small businesses is monthly loan repayments. While they provide flexibility and an excellent timeframe to repay loans, you need to pay attention to those payments to your credit rating. Having a bad credit score for your design agency is something you should avoid, as that can bar your ability to get more loans in the future when you need them.
With invoice finance, you don’t have to worry about making all those payments on time. This is because the factor immediately pays you a percentage of the invoices and collects the debt from customers when it’s due. So, there are no monthly repayments for you to handle.
More Financial Control On The Invoices
Invoicing finance also allows you to have more control over the invoices. You can choose which invoices you want to sell and when. This will enable you to decide when and how much cash flow is coming in, giving you an edge in budgeting for future projects or services.
Additionally, some factoring companies provide the flexibility of the percentage of the invoice that they can give upfront. For example, you can receive about 90% of an invoice immediately or only half. This flexibility allows you to decide how much you’ll need for your design agency at the moment or in the future and plan your invoices accordingly to suit your financial needs.
Improved Cash Flow
The immediate access to cash is one of the most significant advantages of invoice finance. This helps pay wages on time but also helps buy new equipment and materials or invest in marketing strategies. This improved cash flow allows you to keep up with the competition, which is especially important for small businesses and design agencies.
By improving your cash flow, invoice finance ensures your design agency has enough money to take on new projects and invest in growth opportunities. For example, you can use it to market your services to new clients and show that you can take on more significant projects. You can also use it to purchase design software or revamp your website to stay ahead of the competition.
Invoices Are Collateral
Perhaps your design agency is starting and has little to no credit history. Getting approved for a bank loan or other traditional financing options can take time and effort. Access to loans is necessary for your design agency business to succeed. A bad credit score means you miss out.
Invoice finance offers the advantage of significantly reducing risk since invoices are used as collateral. This means you don’t need to put up any additional assets to secure a loan, making this financing more accessible for small businesses. As long as there are outstanding invoices, you’ll have access to fast cash even with a low credit score.
It Does Not Affect Your Credit Score
Invoice financing is considered a sale and not a typical loan. You provide your outstanding invoices for your design agency to the factoring company, and they give you the money. As such, it will not show on your credit score.
This is a significant advantage as it will only affect your ability to get other loans or financial help. However, you should know that some factoring companies may consider customers’ creditworthiness. This ensures that they can collect the debt when it’s due.
It’s Easy To Apply
The application process for invoice finance is relatively straightforward. You’ll need to provide details of your customers, invoices, and credit history before you can get approved. Most companies have an online application process, so you don’t have to wait in line or fill out lengthy forms. Additionally, you can get approved quickly and typically have access to your funds within 24–48 hours.
Conclusion
Invoice finance is an excellent avenue for design agencies that want the flexibility of having more control over their cash flow and access to fast financing. It has several advantages, like improved cash flow and collateral not affecting your credit score. Invoice finance may be right for you if your design agency is looking for a way to free up capital and stay ahead of the competition.
