A survey conducted by the Central Bank of Nigeria in 2019 found that 74% of MSMEs had experienced difficulty accessing finance to run their businesses and this happened because so many of them were in need of something to stand in as their collateral. But here comes the game-changer, invoice financing!
Invoice financing is a financing option that has gained popularity in recent years, especially among small business owners. It is a financing solution that enables businesses to receive immediate payment on their outstanding invoices, boosting their cash flow which is necessary to keep their business operating. In this article, we will take a closer look at what invoice financing is, how it works, and the benefits it offers to small business owners.
What Is Invoice Financing?
Invoice financing is a type of short-term borrowing where a lender provides financing to a business based on the value of its outstanding invoices.
This type of financing provides businesses with immediate cash flow to meet their immediate financial needs, without having to wait for their customers to pay their invoices.
Take a look at this scenario: Fiks owns a small landscaping business and had just finished a big project for a client. The client is unable to pay at the moment but she needs to pay her employees, buy new equipment, and cover other expenses related to her business.
She is in a bind because she needs cash flow to keep her business running smoothly, but can’t afford to wait for 60 days to receive payment from her customer. This is where invoice financing comes in and with Earnipay, the process will always be seamless.
How Does Earnipay Invoice Financing Work?
- A business owner submits an outstanding invoice to Earnipay for approval. Then, we review the invoice to ensure that it meets our eligibility requirements.
- Once the invoice is approved, Earnipay advances a percentage of the invoice value to the business, typically ranging up to 80%.
The advance is deposited directly into the business’s bank account, providing immediate access to cash flow.
- When the invoice becomes due, Earnipay collects payment from the customer who owes the invoice payment. The provider then pays the remaining balance, minus their fee for the financing service, to the business.
How much is the processing fee, and how is it calculated?
The processing fee is 3.5% per 30 days and we offer up to 80% of the invoice amount disbursed. An additional 0.02% default cost may be applied for 10 working days, after which Earnipay may require repayment of the advance payment with unpaid interest.
With this feature, you don’t have to use any of your belongings as collateral which is why it is totally different from the traditional method of a loan application. Ready to get started? Apply here.