If you’re looking for a financial solution to ease cash flow, you may have heard about the benefits of facilities that offer secure working capital with no collateral.
For those small to medium sized business owners who may not be sure what collateral is and what sort of financial solution would or wouldn’t require it, this article is here to help you out.
What is Collateral?
In the context of a business loan, the term collateral refers to the asset (most commonly property) that a borrower of funds pledges to the lender to act as security for the loan. This means that if the business fails to repay the loan according to the agreed terms, the lender has the right to seize ownership of that collateral to recover any outstanding amount. Equipment, inventory or even accounts receivable can all be held as collateral as well.
Financial facilities that require collateral do so to reduce the risk of loan defaults leaving them out of pocket, which can sometimes incentivise them to offer lower interest rates and/or more favourable loan terms.
Do Business Want a Secure Working Capital Loan with No Collateral?
Every business is different and the right financial solution, whether it is a loan or alternative form of funding, will vary from circumstance to circumstance.
There could be several reasons for a business owner to seek working capital solutions that do not require collateral.
1. Lack of Assets
For new or start-up businesses there may not be substantial physical assets to qualify as collateral. Therefore, to obtain funding they would need to seek an alternative source of secure working capital.
2. Speed
Some businesses seeking working capital due to gaps or uncertain cash flow may need access to a financial facility quickly. Unsecured loans, i.e., those without collateral, provide faster approval processes and simpler eligibility criteria.
Invoice Finance – reliable working capital
At ScotPac, we understand businesses’ needs to obtain secure working capital with little or no collateral. Our Invoice Finance solutions are designed to offer exactly that. It’s all about giving businesses access to tomorrow’s payments today.
Similar to aline of credit, this financial product helps turn outstanding customer invoices (in other words, invoices that have yet to be paid) into a reliable source of working capital. The immediate injection of cash can help you capitalise on opportunities, cover shortfalls in cash flow or make further investments in the growth of your business.
In essence, instead of having to put up collateral, you simply submit the designated outstanding invoice or invoices to receive up to 95% of its/their value in advance. The remaining 5% is then paid out once the invoices are settled by the customer – less any fees. There is no property security required and with limits ranging from $10,000 to $150 million it is a great option for businesses of all sizes.
What Can Invoice Finance Be Used For?
1. Manage Cash Flow
If you need to ensure ongoing operations for your business, Invoice Finance can help you manage cash flow effectively to cover costs. Reliable, flexible and on your terms, you can access the working capital you need, when you need it.
2. Fund Expansion
If your business is ready to grow but you don’t have the cash on hand to fund it, Invoice Finance can help you access owed money to you ahead of time to take advantage of the opportunity presented to you.
3. Capital Disruption
Whether its seasonal fluctuation or external market shocks, access to speedy finance can be critically important in meeting your expenditure needs in the event of a disruption to working capital.
4. Asset/Inventory Investment
Not all businesses are able to put up the cash when they need it to invest in new assets such as machinery or equipment or to place new orders of inventory. Yet, that same expenditure could be invaluable for ongoing success. That’s where Invoice Finance can help.
5. Start of Buy a Business
Sometimes it’s not all about growing an existing business. Invoice Finance can also be tailored for applications where one wants to buy a business or start a new one of their own.
What are the Benefits of Invoice Finance?
1. Improved Cash Flow
The most obvious and intuitive advantage of Invoice Finance is the improved access to secure working capital. The infusion of cash can help businesses bridge critical gaps between the issuing of an invoice and the receiving of payment to meet financial obligations, fund ongoing operation or invest in growth.
2. Predictable Access to Working Capital
Unlike some other forms of financial solutions, such as business loans or even lines of credit that don’t require collateral, Invoice Finance offers a far more predictable and consistent cash flow stream. The injection of working capital can be controlled based on the invoice or invoices submitted for financing, allowing you to customise your access to funds however you need.
3. Speed of Accessibility
With no collateral required and minimal eligibility criteria, businesses looking for fast and secure access to working capital benefit from Invoice Finance. In as little as 24 hours, you can have access to a secure line of funds to help ensure the ongoing success of your business.
ScotPac – Your Partner for Working Capital Solutions
Here at ScotPac, our clients are more like partners and stick with us for the long-term. Why? It’s not just thanks to the breadth and depth of financial capabilities and solutions. It’s because we are able to offer tailored solutions based on the needs and preferences of the individual business circumstances of our clients. If you’re unsure whether ScotPac is right for you, you can check out our previous case studies, testimonials and reviews.