Invoice financing on the rise as an alternative credit option for SMEs

There has been an increase in companies using invoice financing, a financing option with a revolving credit line for unpaid invoices, to improve business cash flow.

One bill financing provider, OptiPay, has reported that it has provided over $25 million in financing since the beginning of this year, a nearly 10-fold increase in new customer acquisitions.

“We’ve seen a tremendous increase in broker inquiries as access to capital becomes more difficult for many businesses,” said Angus Sedgwick, CEO of OptiPay. “Banks are becoming more risk-averse in the current climate and this is forcing many companies to look for alternatives to maintain their cash flow.”

OptiPay’s disclosure comes as rising interest rates, a rise in the cost of living and a growing number of businesses defaulting on their bank loans have prompted many businesses to turn to alternative borrowing options.

“Most of the new inquiries came from the agriculture, transport and logistics, mining services and manufacturing sectors,” Sedgwick said. “Many SMEs are increasingly turning to brokers to facilitate their lending while juggling unpaid tax debts, supply chain problems and rising inflation.

Sedgwick explained that any business that invoices another business for goods or services on credit terms is a good candidate for an invoice financing opportunity, with businesses typically accessing up to 90 percent of their sales proceeds within 24 hours of issuing their invoice . Unlike more traditional business loans, with this form of borrowing there are no ongoing repayments to the lender as they are repaid when the borrower pays the bill(s). The fee paid to the financier is usually between one percent and three percent of the invoice value.”

“Cash flow is everything to a business and in the current economy, maintaining it is even more important,” concluded Sedgwick.