The engineering sector faces unique challenges that can impact cash flow and prevent growth. Within the engineering sector, clients are notorious for paying invoices late, which can cause cash flow issues. Delayed payments can negatively impact your whole business, putting unnecessary pressure on you to pay your suppliers and your employees. It can also feel as if your business is stagnating, when it could be growing. However, invoice finance can help…
What is invoice finance for the engineering sector?
In today’s economic climate, some companies take full advantage of the repayment terms offered and it can take months for them to settle what they owe. This in turn leaves cash flow strained and suppliers left unpaid.
Invoice financing helps you to manage your cash flow by bridging the gap between the point at which you make a sale and the time payment is received from the debtor. It means you can avoid the usual wait for invoices to be paid: instead of waiting for the usual payment terms, invoice finance ensures you get most of the cash immediately, so you don’t have to wait to get paid. Put simply, invoice finance allows you to free up instant capital from unpaid invoices.
What are the benefits of invoice finance for engineering companies?
- Invoice financing gives you immediate access to cash without a loan
- Helps you manage your cash flow by allowing your business to get paid immediately for products/services provided.
- Supports your business growth: cash can be put straight back in the business, hence increasing turnover and profits more quickly.
- Offers a lower-risk option due to the fact that repayments are linked to invoices raised
- Offers a funding options that is no risk to your assets
- Reduces your risk of late payments and bad debts
For business within the engineering sector, invoice finance helps you rid your engineering company of cash flow issues brought on by delayed payments.
Within the engineering sector, clients are notorious for paying invoices late – so instead of awaiting payment (whether their terms are 30, 60 or even 90+ days long) you can release up to 95% of the invoice value quickly.
How does invoice finance work?
With invoice finance, businesses pay a small percentage of the invoice amount to the lender as a fee for borrowing the money. Nothing needs to be repaid at all to the funder, as the funder only collects their money from your debtors when the debtors pay their invoices.
You will agree to an invoice finance deal that gives you an advance amount, which is how much of the invoice your lender will pay up front (for example, 85%). You will also agree a fee amount with your lender (for example, 3%) – this means that 3% of every invoice that is paid by a client goes to your lender.
Why invoice finance is ideal for the engineering sector
Invoice financing is ideal for the engineering sector as it gives you access to funds which can help to cover outgoings such as factory overheads, staff wages and suppliers, or to invest in more engineering machinery, equipment and software.
It also frees up owners of engineering companies to focus on running and growing the business.
How PMD can help with invoice finance for the engineering sector
PMD are experienced in securing invoice finance for clients, and work regularly with businesses in the construction sector to help facilitate their growth. PMD has access to over 50 invoice financing companies in the Invoice Finance market, and will help to take the hard work out of applying for invoice finance, leaving you free to concentrate on running your business.
PMD’s dedicated team will take the time to understand your business and find the right funder to support your growth plans. If you already have an existing Invoice Finance facility, PMD can benchmark this against what is available in the market and improve on this by either reducing costs or increasing funding, and in many cases both.
Get in touch today to see how invoice financing can benefit your engineering company.