Home » Business, Finance » Importance of Invoice Discounting to SMEs

SME’S must stay afloat in the face or these challenging economic times. Are you a small or medium size enterprise owner and wondering where you will get funds to pay your bills, taxes or even payroll? You are not alone. This is familiar territory for most SME’s. Small businesses must have continuous cash flow so as to survive otherwise they would be at the brink of death whenever customers fail to pay or honor the invoices in time. Different businesses will employ different strategies in order to secure funds to sustain the business. One of the tried and tested options for successful SME’s is invoice discounting.

A number of studies point out that up to 80% of small business failure happens because of insufficient cash. In most cases, going the traditional way of getting a loan from the bank may not always be practical. This is especially so when a credit line is required and which may not be possible for companies that are just starting out. This is where selling of some unpaid invoices to an invoice finance company kicks in. This ensures a consistent flow in cash that will help the company pay its bills, taxes and to pay for orders thus staying in business without any problem. This is a very wonderful source of working capital for small and medium size enterprises that sell to other businesses especially on credit terms. Apart from being a meaningful source of working capital, invoice financing can provide protection to an SME against bad debts.

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