There are several things you need to consider when running a business. To keep your business stable, one crucial aspect is ensuring the availability of working capital. If there is no working capital, it will be difficult to run or develop your business.
One way to ensure the availability of working capital is to manage your cash flow properly.
There are many ways to regulate cash flow, and one of these is by ensuring that the cash to cash cycle or cash conversion cycle–the period of time between cash leaving (for example to buy raw materials) and cash arriving (for example payments from customers)–is as short as possible. Invoice financing is one way in which you can achieve this.
Before finding out how you can get access to invoice financing, let’s first find out what it is and how it works.
What is Invoice Financing?
If you run a B2B business–where your customers are businesses and not consumers–it’s common that your customers don’t wish to make payment immediately after you have delivered the goods or services and issued the invoices. Instead, your customers usually make payment only after an agreed amount of time.
In Indonesia, this is known as the terms of payment or TOP, generally ranging 30-90 days from the time the invoice is received by the customer.
TOP that is too long and is not covered with sufficient working capital can result in delays for some of your business activities. This is because you have yet to receive the payments that you should have received for the work you have completed, so you can’t use them as working capital to carry out other jobs or orders.
This problem gave rise to a solution called invoice financing.
Invoice financing is a type of financing provided by financial institutions that can help advance the payments you are expecting from customers. Invoices that have been sent to customers will be used as the basis for requesting financing from the relevant financial institutions. With this cash advance, your business can continue to run and grow.
How Invoice Financing Works
Below is an illustration of how invoice financing works in general.
The way invoice financing works is quite simple. Let’s look at the example in the image above.
Let’s say you have sent an invoice worth IDR 1,000,000,000 to your customer, with TOP of 90 days. You can use this invoice as a basis to request financing from a financing institution. In this case, the invoice payment can be advanced by a maximum of 80% (Rp 800,000,000) of the invoice value.
After 90 days, when the invoice is due for payment, the customer will make payment to you. You will then repay the financing institution the amount of IDR 800,000,000 loaned to you, along with the interest.
It’s easy to get invoice financing through Xendit. The conditions and process are relatively simple:
Conditions:
- Your business is a legal entity (PT or CV)
- Your business has been operational for a minimum of 1 year
Process:
- Submission of financing (financing application)
- Submission of documents:
- Company documents (Deed of Establishment, SK Kemenhumkam, NIB, SIUP, company NPWP, KTP/NPWP of management)
- Company financial statements for the last 2 years, including balance sheet and profit/loss statement
- Company bank statements for the last 6 months
- Historical recap of invoices that have been paid by the proposed customers
- Underwriting/assessment process
- Financing approval
- Drafting and signing of agreement, and collateral handover
- Disbursement of funds
Benefits of Invoice Financing through Xendit
Some of the benefits of obtaining invoice financing through Xendit are as follows:
1. Fast
Time is money–literally! The longer you wait for the payment from an invoice to arrive, the more business opportunities you miss because of a lack of working capital.
Especially for startups in the hypergrowth phase, the weeks and even months needed for the conventional financing approval process is unacceptable, as the opportunity they’re trying to capture can be highly time-sensitive.
You don’t have to wait for a long time to get invoice financing through Xendit. Disbursement can be made within 2 weeks from the receipt of all required documents. In fact, if you already have an active facility, the funds can be disbursed within one working day!
2. Healthy cash flow for your growing business
As discussed above, invoice financing can help keep your business’ cash flow smooth. Does it mean that you’ll be using all your profits just to pay interest on the financing, though?
With the help of invoice financing, you receive a more timely inflow of funds that you can allocate to other jobs or opportunities. Proper allocation of these funds can help your business grow much more quickly–even exponentially.
Taking into account the business growth that could not have happened without the funds made available through invoice financing, you’ll see that the additional income you gain will likely exceed the amount of interest you have to pay.
3. Flexible financing without collaterals
One of the reasons why it’s difficult for businesses to get access to financing from conventional banks is that they lack assets that can be used as collaterals.
Invoice financing through Xendit does not require assets to be provided as collateral. This way, we provide more flexibility for businesses to gain access to additional working capital. Combined with fast processing times, invoice financing through Xendit is a solution that can greatly accelerate your business’ growth.
4. Licensed financing institution
Xendit, as the best payment gateway in Indonesia, collaborates with various partners who have been registered with and certified by the Indonesian Financial Services Authority – Otoritas Jasa Keuangan (OJK). This ensures that customers receive financing services that are not only fast and flexible, but also provide peace of mind.
Grow your business with invoice financing
Have you been wasting time waiting for invoices to be paid? Have you been forgoing business opportunities because of this?
Now that you know what invoice financing is and how it can help your business, it’s time to look for a solution.
Simply contact us, and we’ll work with you to find out how our licensed lending partners can help you grow your business with invoice financing.
About Xendit
Xendit is a financial technology company that provides payment solutions and simplifies the payment process for business in Indonesia, the Philippines, and Southeast Asia, drom SMEs and e-commerce startups to large enterprises. Amidst the fragmented payment landscape in Southeast Asia, Xendit enables businesses to accept payment from direct debit, virtual accounts, credit and debit card, eWallets, retail outlets, and online installments.
For many businesses, accepting payment online is new territory, but we’re here to help. We helped 1000s of businesses come online and we’d love to help you too.
Find out more about Xendit, or sign up to try our dashboard!
