6 Ways SME Invoice Financing can Ease Your Cash Flow Concerns

SME Invoice Financing for Cash Flow Problems - Blog

We’ve all heard the phrase “revenue for vanity, profit for sanity”, but what most people forget is the final bit “and cash is King.”  The simple fact is that without cash in the bank, even the most healthy-looking trading companies will fail.   

We understand that sales generate revenue, and the unit economics of each sale will dictate the size of the profit of each transaction, however, what we must never forget is that none of this really matters until when we get paid on the date that cash lands in our company’s bank account.

With this in mind, we unpack how invoice financing can be used to ease cash flow concerns, particularly for small to medium businesses.

What is invoice financing for SMEs?

In 2016, JP Morgan Chase undertook a study of 600,000 companies across the USA and concluded that on average, a small business will hold 27 days of cash in reserve. This is a tiny buffer to work with when you consider that many customers insist on payment terms of at least 30, if not 120, days, putting considerable strain on a business’ cash flow. SME invoice financing can offer more of a buffer.

Invoice financing at its core is extremely simple. When you have delivered your product and/or your service, you raise an invoice to your customer, but rather than waiting out the payment terms and putting your cash flow under pressure, for a fee, an invoice finance company will pay part of the value of that invoice to you, enabling you to receive some cash far more quickly. 

How SME invoice financing eases cash flow concerns

So, how exactly does SME invoice financing help small businesses with their cash flow? We outline six of the ways below. 

1. SME invoice financing works

It may seem simple, but as a tool businesses can leverage to optimise their cash flow, invoice finance works! How? Well, a good provider will fund at least 75% of the value of your invoice and will pay you the cash within a day or two.  Better invoice financing providers, like Hydr, will fund 100% of the value of your invoice and will pay you the cash within 24 hours.

2. Invoice financing doesn’t increase your business debt

Because you are receiving funding against an asset, i.e, that invoice which you have generated and issued to a client, it doesn’t add to the debt burden of your company, unlike a loan, an overdraft or borrowings against credit cards. Ideally, if you are trading well, or maybe even growing, and you finance the optimal number of invoices, you should have no need for any other form of borrowing because your cash flow is improving with every invoice you raise and fund.

3. It’s a flexible instrument

There are many types of invoice financing available, from the somewhat complex ‘whole turnover’ agreements to ‘spot invoice finance’ which is the occasional funding of a single invoice. Ask your accountant or a reputable broker for advice to figure out which type would be best for your company and your circumstances.  

At Hydr, we have pioneered what we call ‘Selective Debtor Finance’. This instrument gives you the ability to choose which debtors within your ledger you would like us to fund, and we fund only those debtors selected. We recognise that you may not want to fund the entire turnover of your company, but you also don’t want to fund the odd invoice here and there, at a relatively high cost per transaction, so this approach is a happy middle ground whereby you choose the debtors you wish to be funded, and the rest are left alone, giving you further flexibility when it comes to financing your SME invoices. 

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4. Invoice financing provides certainty

There’s nothing quite like knowing exactly what you are going to get and when you will get it. You can manage your own expectations and plan accordingly. The same can be said for your cash flow, and SME invoice financing can help you achieve that sense of certainty in your income. The funds you receive through invoicing are exactly related to the value of the invoice you raise. If you use invoice financing properly, you will be able to really plan for the future, certain that you will have the cash flow to fund your ambitions.

5. Invoice financing is simple to apply for

Depending on the invoice finance provider you choose to go with (and the type of product you select) applying for invoice financing doesn’t have to take days and days. In fact, the process can be far shorter than applying for a loan, and may not even require you to have a charge held over your business. At Hydr, we have made it possible to apply for SME invoice financing in just 15 minutes.

6. Invoice financing is entering the digital age

For such a well-established instrument, invoice finance has taken a while to enter the digital age! There are still a number of old-fashioned providers who, whilst good at what they do, will insist on a great deal of paperwork and quite an arduous amount of time to manage their facility.  Hydr is at the forefront of bringing invoice financing into the digital age. We are paperless, we connect seamlessly with your cloud accounting and bank account (through Open Banking), which means that signing up is conducted purely through digital and managing the account is extremely simple, as a result. 

Does your business need an invoice financing solution?

As we enter what we all expect to be a challenging trading environment, business resilience is going to be key. Ultimately, the success and resilience of your business are closely tied to your ability to maintain a healthy cash flow. There are many factors that can contribute to poor cash flow, from a lack of budgeting and overspending to those unavoidable, unplanned expenses. Poor cash flow can also come from rapid growth or overtrading. 

A significant contributor to cash flow problems for many businesses is long payment terms or late payments from suppliers. Waiting lengthy periods, sometimes in excess of 120 days, to be paid for work that you have already completed can be soul-destroying – as well as being a really limiting factor for your business. So, when it comes to debtors fulfilling their invoice obligations, invoice financing gives you the control to ensure this factor does not hinder your cash flow further. 


SME invoice financing offers business owners an opportunity to streamline their cash flow, ease their cash flow concerns, and continue business as usual despite payment delays. Bridging the gap between you and your customers by shortening the length of time you wait to be paid is a proactive and positive step to take in cash flow optimisation, and not only will it free you up to focus on growth but it will make your business far more resilient.

How Hydr can help

Hydr is a new entrant to the market, and we fund 100% of invoice values for a fixed, fairly priced fee. Signup takes around 15 minutes, the process is completely digital and our deep integration with cloud accounting makes managing the account simple and straightforward. 

If you’re considering invoice financing, find out more about our solution, or contact our friendly team to get started.

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