A lot of invoice financing features are very enticing to a business in need of supplementary funds. Invoice financing can indeed be the key to a successful growth for many businesses. Like all financing options, you should research the benefits and potential risks of working with an invoice financing company.
Here are some of the risks you could encounter working with an invoice financing company;
1)Loss of control: Handing over ownership or responsibility for anything concerning your business to an outside agency can be difficult for some business owners. Outsourcing sensitive matters such as invoicing and debt collection can be even more uncomfortable to do for a business owner.
Signing up with an invoice financing company will mean that the company takes up responsibility for all communications in the invoicing and collections process. As a result of this, a business' existing customer will likely receive more demanding emails and notifications than they are used to and this can negatively affect the relationship between the business and its customers. When the focus shifts from maintaining good customer service to bringing in the cash, customer relationships may suffer which could cost the business in the long term.
2)Signing with an unreliable financier: Financing companies are a well-respected and widely accepted way for businesses in need to acquire the funds needed to grow.
However, it is very important to conduct your own research before entering into business with any company. When choosing your financier, you should ask as many questions as you have such as professional references and how long they've been in business for. Read client testimonials to see who you're getting in business with before agreeing to sign any document. Lack of referrals and complaints in the records of a financing company are red flags which tell you to avoid that particular company and find a different invoice financing company to work with.
3)Hidden and overpriced fees: Some businesses are scared to work with invoice financiers because they believe that there will be huge hidden fees. You're in luck here when you sign up with Bridger because there are no hidden costs to worry about. All invoice financing companies charge fees for their services which should be clearly stated before you go into business with them or sign any document. Not all financiers charge fairly so is important for you to make sure to do a thorough research before going into business with any financing company. You should pick a suitable financier for your business after you must have taken the necessary steps, and then send a well written application to the company you have chosen to work with.
A possible disadvantage of invoice financing is that service fees can add up overtime. Although, getting immediate access to funds that are useful in growing your business outweighs that because financing helps your business to be successful in the long run.
4)Customer perception: When a business signs up for the services of an invoice financing company, customers are bound to notice this change in the style of communication, bank details, etc. Therefore, bringing in a third party to handle invoices and debt collection may give the customers a wrong notion that the business is experiencing cashflow problems. This wrong perception can make the business lose customers because no one wants to be associated with a failing business. This can therefore be harmful to the business and negatively impact the business' reputation in the long run.
As mentioned earlier, financiers can negatively affect the good relationships you must have built with your customers because the job of the financing company is to handle invoices and debt collections.
There are many misconceptions regarding the risks involved in invoice financing, but by doing through research, all of your questions can be answered before making your final decision. Invoice financing is one of the best financial options for the smooth running of your business and you should send in your application.