MarketFinance Explains How Embedded Credit, Invoice Finance Can Help UK SMEs

Invoice finance and embedded finance (think: buy now, pay later options at checkout) help companies with improving their cash flow.

On top of this, they manage operational expenditure “to improve their business growth,” the MarketFinance team explains.

Invoice finance has been a tool companies have used “to get paid earlier for their invoices for literally thousands of years,” MarketFinance notes in a blog post. They added that there’s even evidence of “a form of invoice finance from the Romans.” Essentially it’s “an effective way of bringing cash flow forward by trading an invoice for a percentage of its cash value.”

MarketFinance CEO Anil Stocker co-founded MarketFinance, then called MarketInvoice, specifically “to help SMEs who were waiting up to 90 days for their invoices to be paid by big corporations.”

The company began “in the shadow of the financial crisis, when the little guy was really being picked on and underserved by traditional financial institutions.”

By bringing invoice finance into the digital world, businesses “could access funds faster and more easily than ever before.” Since 2011, the firm’s digital invoice discounting has “provided over £3 billion of credit and through it [they’ve] processed over £20 billion in payments.”

According to MarketFinance, invoice finance (or selective invoice discounting as you may see it called) “is a great way to advance large one-off or lumpy payments that your company is waiting on credit terms to be paid.”

Imagine the following scenario (it’s likely very familiar for many):

  • Made up company, Event Seating Ltd, have “secured a deal to provide chairs for the Queen’s Jubilee. Terrific – what a contract to win.” But, “now the business needs to find 50,000 chairs from suppliers who want to be paid in 30 days.” If they’re a new supplier, “they may not give them any credit at all.”
  • As if that wasn’t frustrating enough, “the government is only paying Event Seating Ltd for providing he chairs 45 days after the event.” In short, they “need to pay up after 30 days, but won’t get paid themselves for 45.” “What should they do?”
  • If the business went to a company like MarketFinance “they could apply to get 90% of that invoice paid on Day 1 and pay their suppliers on time.” The remaining 10% “would get to them once the customer pays up after 45 days.”
  • There’s a small fee “to use the facility, but their cash flow is strengthened and they can keep working on different projects too.” For example, “the customer might pay 2.5% to get the money they needed on Day 1 instead of Day 45.”
  • The account “is set up, managed and secured by the company who can now access funds faster.”

As noted in the update:

“So, we know invoice finance works really well for big invoices and infrequent transactions (to save on admin), but what about if instead of being charged to get paid quicker I just wanted to have longer to pay for free?”

The MarketFinance team also mentioned that this is “where embedded finance comes in.”

Suppliers, marketplaces and enterprises can “provide SMEs with longer to pay and more flexible options to boost their cash flow in a safe and secure way at checkout.” This is something they’re “now offering at MarketFinance.”

For more details on this update, check here.

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