Any tech firm will know the difficulties of managing cashflow whilst waiting for payments from 12 month contracts with customers that pay monthly. Great to have won the customer in the first place, not-so-great to have to wait 12 months to get fully paid for your work. If you want to invest in new ideas, hire more staff or get more deals done, tough- you’ve got to sit on your hands and wait.
You could always take a loan from a bank… but often companies specialising in technology services don’t have the fixed assets or trading history your average bank manager is going to want to see. Even if you’re fortunate enough to be accepted for a bank loan, it’s going to be expensive. Overdrafts are another way to provide flexibility, but overdraft limits can be prohibitive.
Some founders take on equity finance, giving up a slice of control over their business to solve the cash flow crisis. Although attractive in the short term, this approach can be very expensive compared to debt in the long run.
It’s frustrating because you know your business is doing well, you know people want to buy your product, you have everything a successful business needs. Except cash.
The answer? Use what you have to get what you need. There’s value – cash value – in the contracts and retainers your customers have signed with you.
MarketInvoice is now enabling you to get up to 80% of the value of a 12 month contract up front on day one. If you sign a one year deal with 12 monthly payments of £20k, you can get over £190k right away. You’ll pay 10% – 14% APR, and collect the rest of the contract’s value once repayments are complete.
The ability to drawdown 80% of a contract’s value in advance does more than address cash flow issues. The approach is cost-effective, more so than selling separate invoices, with a one-off charge against the contract value. Contract finance also lightens the administrative load, as once a contract is validated by MarketInvoice, there is no need to go back to clients month to month.
Plus, it’s often the cheapest option against alternatives; advances against contracts incur only a one-off charge. It’s quick, too. Funds have been transferred in less than a week from an initial enquiry.
One of MarketInvoice’s contract finance clients, secured over £100,000 upfront against a contract instead of 28 separate charges for invoices that the company would otherwise have looked to sell using the invoice finance product. Much easier, and the cash lump sum can be used to help grow the business from day one of the contract being signed.
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