About Invoice Financing for SMEs in Singapore
Invoice financing is now becoming a rising option for many businesses and SMEs in Singapore. If your business has yet to explore the benefits and advantages it has to offer, you should do so soon.
Outstanding invoices are one of the biggest challenges which are faced by businesses in Singapore. Businesses are going to be significantly impacted if the number of unpaid invoices continues to rise because it will compromise the businesses cash flow. Eventually, this could lead businesses down the road of debt and bankruptcy.
The Straits Times published an article in 2014 which highlighted the fact that Singapore had the most number of invoiced which went unpaid among all the other Asia Pacific countries in the region.
Even invoices which are paid but paid late, can result in a significant cash flow problem for an SME, because the profit and finances of a company are tied to every invoice that gets sent their way. The financial growth of a business is compromised each time a late penalty is incurred, which is why invoice financing is so crucial to the business world.
Why SMEs Need Invoice Financing
It would be advantageous for SMEs to incorporate the invoice financing system into their business process because:
- Invoice financing helps a business improve its current cash flow. Invoice financing allows cash to be freed up immediately by enabling it to be sold at an agreed upon discount, instead of waiting for the standard 30 to 90 days before payment gets done. This way, companies are able to immediately use this cash and invest it into the company for the purpose of profitability and future expansion, and even to finance overhead expenses.
- Invoice financing helps SMEs keep their credit low, and since they will not be forced into debt this way, they do not have to worry so much about their credit sheet.
- Invoice financing provides the SME with an alternative source of funds. When cash runs low, a business would typically apply for a loan to help them keep the business running. Invoice financing eliminates that necessity because SMEs can simply sell their receivables and get immediate access to their funding.
- Invoice financing also helps to keep a company competitive because cash flow gap will no longer be a problem. This will allow SMEs the freedom to offer a better form of the payment schedule for their clients.
Investors too, stand to benefit from invoice financing because there is a rising option called peer-to-peer invoicing. This is where investors can come in and choose to finance any outstanding invoice of an SME in Singapore.