Secure Instant Funding with Fintech Invoice Financing Services

Cash flow problems are not uncommon for businesses, mostly because of the challenges they face, including the issue of delayed payment. Delayed payment can affect your ability to conduct business, retain an employee base, and source necessary supplies. The race to real-time is real! In a world where 25% of business bankruptcies happen because of unpaid invoices, real-time financing is more than necessary. There are always businesses that are having trouble financing their operations due to delayed payments; one option is invoice discounting. Invoice discounting is a way for companies to manage cash flow challenges.

By partnering with fintech invoice discounting solutions, companies are able to access non-collateralized working capital finance, giving them a promising option to manage cash flows. So, if your cash is tied up in your outstanding invoices and want to get access to cash, use invoice discounting as a way to facilitate this.

What is Invoice Discounting?

Invoice discounting is the act of a business selling its invoices to a third-party company, also referred to as a financing company. After a company sells its invoice, it will receive a percentage of the full invoice amount billed to the client. Now that the invoice is sold, the finance company is responsible for collecting the full payment from the buyer.

Accessing cash, which improves cash flow and working capital cycle, is a common reason organizations sell their invoices. Aptly noted that many businesses that do not want to, or cannot wait for, clients to pay their bills, take advantage of invoice financing. Invoice discounting is considered to be an effective way of financing in India, among other financing methods, including loans, FDs, or overdrafts.

Fintechs normally do not finance these invoices. Fintechs provide a platform for connecting the MSMEs or suppliers (borrowers), with the banks, NBFCs, or institutional investors (lenders) to provide the funds to the borrowers. It connects the two parties, and it allows for faster decisions, easier access, and flexibility.

Benefits of Fintech Invoice Financing Services for Borrowers

Fintech businesses may not lend money directly, but their platforms provide tremendous benefits to MSMEs, startups, and growing companies. Here are the benefits worth noting:

1. Speed to Access Working Capital

Most banks or financial institutions take weeks to disburse money as loans. Fintech invoice discounting platforms help businesses access money in 24 to 72 hours. This is a huge benefit for small businesses who need cash fast to fill orders for customers or pay suppliers.

2. No Collateral

Most of the fintech platforms do not require other forms of physical security in the funding of invoices. Your unpaid invoice acts as your collateral to pay suppliers and retailers. This allows businesses seeking to remain asset-light the ability to operate and innovate without collateral financing for their growth.

3. Better Cash Flow Management

The longer it takes for businesses to get paid, the worse their cash cycles become. Businesses using invoice factoring for fintech eliminate the waiting period of 30, 60, or 90 days to receive money from their Customers. They can access money up front that allows them to cover day-to-day business expenses.

4. Increased Credit Worthiness

Accessing cash on time allows them to pay their expenses on time, which can positively affect their credit score. The more positive credit history they have, the easier it is to get more funding down the line.

5. Digital and Paperless Process

Fintech has turned the entire need for KYC and funds disbursal into a digital process. This helps eliminate the problems with documentation, branch visits, and delays; therefore, time-sensitive businesses can offer digital invoice discounting via fintech without any issues.

6. Competitive Options between lenders

Fintech platforms bring lending partners on one dashboard. The borrower can compare interest rates, terms and time processed to get the right option suited to them. This competitive landscape helps them reduce pricing with a fair rate.

Advantages of Fintech Invoice Discounting Solutions to the Lenders

Fintech Platforms also provide several alternatives to aid the lending side of the ecosystem:

1. Risk-minimized lending

Invoice financing is underpinned by real trade receivables. This means that lenders are far more aware of when repayment of loans will occur, and this minimizes credit risk when compared to unsecured loans.

2. Gain Access to New Borrowers

By partnering with fintechs, NBFCs, and banks can access a breadth of MSMEs and startups in markets that are underserved and have barriers to entry from mainstream traditional finance.

3. Data-Driven approach

Fintech platforms use AI and data analytics. The evaluation of the borrower’s risk profile, credit behaviour, invoice history, etc, enables smart underwriting and quick approvals.

4. Compliance and transparency

Most fintech platforms operate on limited licenses and adhere to the correct codes of conduct, documentation/ compliance, and KYC checks to properly minimise fraud and improve trust.