1. People will think my business is in trouble.
The stigma is not what it used to be. More than 40,000 businesses in the UK, and thousands more worldwide, use cash flow funding solutions and they are mature products in Europe and the U.S. Although in its infancy in Australia, there are thousands of businesses with hundreds of thousands of customers using cash flow funding and it is increasingly acknowledged as a superior working capital solution for growing businesses.
2. My customers won’t like it and will stop buying from me.
Thankfully, this is a myth that is phasing out as invoice finance becomes more mainstream.
Some of the largest firms, including many household names, are familiar and comfortable with their suppliers using invoice finance. If disclosure really is an issue, however, the product can be provided confidentially (subject to criteria).
3. I will lose control of my business.
The product can be as high-touch or low-touch as you want it to be; one of the most notable advancements of payroll funding in recent years is that it is no longer ‘one size fits all’. Facilities can be tailored to your needs and integrated with your systems and processes to give you greater control.
4. You will lock me into a long-term contract that I can never get out of.
Lock-in contracts are no longer the norm. Flexibility is now the buzz. With no minimum terms available, it is now easier to trial an arrangement without signing up to a lengthy contract period.
5. It’s too expensive.
Compared with what?
The tendency is to compare invoice finance with a bank overdraft or other types of secured loans but that is like comparing apples and pears.
Payroll Funding will always cost more than a traditional lending facility that is secured by property, but the cash flow benefits greatly outweigh them too. Simple pricing models available today make it easy to calculate how much of your gross margin needs to be allocated to funding.
If your Gross Margin is 15% and the cost of funding is 2%, then all new sales will grow your bottom line. Would you rather 15% of $1m sales or 13% of $5m sales?
If finance can help you grow your Gross Profit from $150k to $650k, you may consider it a very good friend.