The acquisition is a well-thought-out and researched move for any company. It reveals the company’s expansion into providing services on a larger scale. With the acquisition, the parent company gets access to the acquired company’s resources, finances and customers. It is thus a win-win situation for the company. However, financing the acquisition is the toughest part of the deal.
It is because financing the complete costs of the company you want to acquire is challenging. It is because even established businesses lack that money upfront. They invest in expansion moves, legalities, managing the existing infrastructure, etc. Thus, the businesses lack sufficient capital to assist the company purchase.
In a world where maintaining a decent cash flow is challenging, invoice financing emerges as a game changer. It offers a lifeline to address cashflow challenges and promote easy expansion. It is the reason this innovation solution is gaining traction among businesses of all sizes. It revolutionises the way a business manages its finances and grabs growth opportunities.
The blog lists invoice financing and the ways it assists a company with acquisition goals.
Let’s first analyse invoice financing.
What does invoice financing mean?
Invoice financing, often referred to as invoice factoring, is a financial facility that enables businesses to access cash tied up in unpaid invoices. Here, rather than waiting for the customers to clear invoices, you can use the dues to get funds against it. Most invoice financing lenders provide up to 80-90% of the invoice value. The business must clear the payments after receiving the cash payments from the clients.
Should I get invoice financing?
Invoice financing is ideal for businesses with good client backup and a consistent stream of incoming payments from customers. It is the reason seasonal businesses and self-employed may struggle to get one.
5 ways Invoice Financing Helps Acquire a Company Hassle-free
When looking to finance a company purchase, invoice financing may help. With this, you may get instant finance to accomplish your company purchase goals. It helps do so without staking your precious office belongings as collateral.
Moreover, you do not need to pay interest on this financing type. It is because you get the money that totals your invoice value. However, the loan provider may charge a fee for their services.
Get instant cash without getting into debt
Invoice financing is a quick and flexible way to fund your business requirements. You do not pay over what you owe as you get it in exchange for unpaid invoices. Pay interest (if lenders charge one and fees to clear the debt. The company provides 70-80% of the finance immediately and the rest after you get the remaining payments from the client. Thus, it eliminates any debt.
If you struggle to spot the best lender for your needs, a regulated invoice finance broker may help. It quickens the process to get the right person that meets your affordability and finance requirements. With this, you can achieve your goals without further delay and obstacles.
Just need to meet the minimal qualifying criteria
Individual businesses must meet basic criteria to qualify for the loan. Unlike other business loans, it is the easiest one to get. You can fund your needs instantly by using invoice financing if:
- You raise invoices for customers for products and services
- You have reliable customers with good finances and credit record
- You are a limited company, LLP or a sole trader
- Your business is in the UK or Ireland marketplace
- You have verified company registration documents
- You have been operating for 3 or more years
Sales ledger management assistance
The invoice financing company provides a sales ledger manager who maintains everything on your part. He helps you secure the funds, analyse the usage, and use them appropriately.
He also helps you know the total amount you received from the firm, the utilised amount and the amount you will receive after the remaining invoice clearance.
Moreover, he helps you with -
- updating cash flow forecasts,
- implementing plans to counter cash flow gaps,
- targeting previous debts
- identifying unpaid invoice proportions.
They also help you know the right deal to finance the business purchase successfully. Thus, it saves costs on hiring a separate ledger manager for your financial needs.
Helps with regulatory compliance and contingency planning
Navigating through the business landscape of mergers and acquisitions requires the company to comply with various regulations. A business seeking acquisitions must comply with regulations for a sound and legal transaction.
Undergo through a process of researching and ensuring all the compliance documents to follow. Such legal compliance and activities require a business to be backed by sufficient capital. Here, invoice financing can help you.
Analyse the document requirements and statutory and contingency requirements before financing it. Check whether the required documents are updated according to the best of your knowledge.
Invoice financing experts help with due diligence
Knowing the company you plan to acquire is critical for successful acquisition. If you share doubts or struggle to analyse the financial books, invoice finance experts may help. Hiring one before or in the initial days of your decision to acquire a firm can be profitable.
It may help you gather additional details about the other company’s finances, debts, existing projects, clients, employees, policies, etc. Additionally, it helps them form relationships with administrators and the acquired company. It thus keeps the company in a strong position to secure a good price.
Alternatively, planning an acquisition is a crucial thing for any company. It requires consideration over small things. From researching the company’s revenue aspect, reputation, finances, and policies, you need to know the debts.
It is because, after the acquisition, you will be responsible for the payments.
Thus, if the debts are not much but are there, plan-up the payments. If balancing this seems challenging alongside your debts, a secured business loan may help. It may help you get a whopping sum that you can use to clear your and the other company’s debts. Identify the best business assets that align with the amount to clear the bills. It will help you get debt-free at low interest rates.
Bottom line
Invoice financing is one of the flexible ways to finance business acquisition goals. It is flexible and allows one to finance needs without worrying about credit or collateral. Moreover, goals like company acquisition require careful analysis of the finances and financial equipment to counter the need. Identify whether invoice finance is right for your business. Individual businesses sharing a good client backup with back-to-back projects can benefit from the facility.
