What is Invoice Financing and How Can It Help Your Business Grow?

Are you familiar with Invoice Financing? Maybe you’ve heard about it from somewhere like a business mentor or a banker. It is commonly referred to as “Factoring”. Well, today I’m going to tell you about how Invoice Financing at FIFO Capital can help to free up cash flow in your business and relieve headaches for you so you can focus on growing your business.

Before I talk about Invoice Financing, I’d first like to tell you about our company FIFO Capital. FIFO stands for “First In First Out”, it’s a common inventory term, but it has a different meaning for our company, which is “Lower Risk and Get In and Get Out Quick”. Great for businesses with large inventories and turnover.

FIFO Capital is an Australian company based in Australia and New Zealand that has been operating for ten years. FIFO recently expanded operations to the UK, Canada, England, Scotland, and Ireland. We’ve been in Canada for less than a year now, but we have funded over a billion dollars globally and have done a huge amount of good, helping small, medium and large businesses all over the world.

So, what is Invoice Financing?

I have to be honest with you, Invoice Financing is not well known in Canada, even by its other name, “Factoring”, it isn’t well known. Only about three out of ten business owners have heard of this product based on my research.

Let’s use an example to help us better understand what Invoice Financing is.

Let’s say you are a manufacturer and you make widgets. You make a sale (way to go!) and then you issue your customer an invoice and you give the standard thirty days to get paid. You might offer a discount, net thirty days, so if your customers provide the payment before the thirty days, they get discounts. In reality, not many people take the discounts, and what they do instead to protect their own cash flow is that they’ll prolong paying the invoice, right?

I wish it weren’t this way. But from the customers we have and the other businesses I spoke to in my research, it most definitely is. Did you know the Canadian statistical average is 47 days for an invoice to get paid? And guess what I talked to a lot of business owners that said, “sixty days I’m waiting, ninety days I’m waiting to get paid!”

I was at an electrical contractor last month who did business for libraries and cities, public buildings for the government in the Brampton Mississauga area. He said, “It’s common to wait thirty, sixty, ninety days and the average being forty-seven”, but he was also talking about “ninety to one hundred twenty days”. Maybe government admin teams need to look at treating local businesses better. When he said, “120 days”, I immediately thought to myself, “That’s a problem!”. You’ve got an invoice collection problem right there and you might want to get that fixed. Sometimes it’s a person, sometimes it’s a process, but I would say, change is needed. Don’t you agree?

Back to the Invoice Financing product. It’s essentially where a factoring company or a finance company — like our company FIFO Capital — will buy the invoice from the business owner on day one or two of the invoice being issued and the cash will be in your bank account within 24 hours. The business can get 80% of the full value of the invoice upfront.

So, if you have a $100,000 invoice, you can get $80,000 the day after you issued the invoice to your customer. We give the business 80% upfront, then, when the customer pays the invoice, they then pay us, then FIFO Capital gives the remaining 20% to the business, less our fee.

What’s the fee you ask? Depending on what we will agree on, with better rates going toward volume, of course, the fee would range around 3–5%.

To make things better, with FIFO Capital, we do not require any collateral and you’re not locked up in our services, there’s no exit penalties, no hidden fees, no locked in contracts whatsoever. You are free to use us and stop using the product at any time.

As a business owner, you have your own operating expenses and invoices to worry about. Invoice Financing is a wonderful financing solution offered at FIFO Capital that will help you free up your cash flow and increase your working capital to help you have more control and peace of mind over the growth of your business.

Are you interested to learn more about FIFO Capital’s Invoice Financing product? Are you looking for unique financing solutions to help your business? Well, my name is Michael Santonato and I am here to help you. I understand the needs that businesses have, having been an entrepreneur and financial advisor myself. For details on how to get started, please email me at Michael.Santonato@fifocapital.ca and request a consultation to see if we can help you.

Michael Santonato is a financial advisor based in Toronto, Canada, who also runs an investment management firm. He is married with three kids. www.MichaelSantonato.com