People connect spending with pleasure. Yet, it is quite different when it comes to business. In the case of running a company, spending double also means working double.
A saying goes: “no one who can rise before dawn 365 days a year fails to make his family rich.” Thereby, pleasure will come later when spending reaches its fruition. By that time, follow the ancient ratio.
Malcolm Gladwell is an author famous for coming up with a similar formula for hard work. However, he also comments that progress is not always about putting 10.000 hours of work. It is because you would also need thinking or the talent to become superstar chess or hockey player.
But what if you have a genius, grit, or a sudden chance to become a superstar in business? In doing so, what if the only impediment is the lack of finance? In this case, invoice financing is the perfect solution, enabling you to spend more on growing your business.
Spending Doubles With Invoice Financing
Hard work on the rice paddies can yield two to four harvests for the savvy ones. To do so, one should nurture the field and show an immense willingness to monitor the slightest changes in water temperature.
Besides overseeing the liquids in the rice paddy, there was another issue to take care of – liquidity. In this case, liquidity is a financial term for the ability to pay the suppliers for rice seeds.
Logically, to gain new seeds, you would need to send your crops to the market. Imagine how difficult the waiting for the payment was when every day decides the future harvest. At the time, it was hard to obtain the seeds in advance.
Nowadays, financial institutions are those seeking fertile ground for placing their money. Because of this, a business that can harvest a profit multiple times is highly favorable.
With invoice financing, the finance for reinvesting is readily available.
Since every invoice can serve as proof of account receivable, these are the sources for credit lines. So, whenever waiting for the invoice due date, the small business can apply for invoice financing.
The invoice financing is an investing tool, perfect for distributors or those needing supplies to produce more, . On the other hand, it solves the problem of liquidity. Thereby, it is a tool for both growing or helping the business to survive.
Thus, for all those that are willing to work double, invoice financing is providing this chance. By doubling your spending on the resources, you are expanding your business.
Similar to the hardworking rice paddy owner, the profit can double, triple, or even quadruple. When the market chance occurs, producing more means selling more.
What Hinders Invoice Financing for SMEs?
However, an old rule of not favoring the small producers still prevails. A hard fact, even though EU commission reports that small and medium-sized businesses account for 99% of all EU companies.
Moreover, these hardworking individuals created more than 85% of the new jobs. At the same time, only 18% of them get credit lines from the banks.
The reasons behind this long-lasting issue are many:
- Information Asymmetry
Less financial data from small businesses limits the credit line approvals. Since new, they often lacked the history of data needed to access their situation. Moreover, the owner of the small business is short of both knowledge and funds to hire consultants.
- Inherent Risk
Established in 1930, Basel III changed as the response to the financial crisis of 2007-09. Sufficient to state that this internationally agreed set of banking measures is not favoring the newcomers. When following the guidelines, banks have higher capital requirements, meaning assets.
Therefore, there is a lack of data, trust, and finally – a lack of assets. But, invoices are already current assets listed on the company’s balance sheet.
Still, when it comes to small businesses, banks can consider these as unsecured crediting of customers. Even if the customer is credible, from the banks’ perspective, there is a high possibility of fraud.
For example, banks are doubtful if the company is using the same invoice to apply for multiple credit lines.
Infidia: Spending Double While Stopping Double-Spending
To help small businesses with additional finance, Infidia is removing the possibility of “double-spending.” In doing so, Infidia is utilizing the latest blockchain technology.
As you may know, an innovation of blockchain lies in the immutability of the records. In the case of the invoice – it means that no one can alter the invoice without making a record. The reason behind this is that every change becomes another block in the so-called blockchain.
Moreover, blockchain is a distributed ledger of records. Thus, there is no central authority that controls blockchain. For this reason, everyone with permission can view, but nobody can alter the invoice without making the record.
What does it mean in the case of Infidia invoice financing?
The answer is quite simple – one invoice can’t serve as a source for the two different credit lines. Since financial institutions have access to the platform, blockchain assures them from double-spending. By doing so, blockchain gives security to financial institutions.
Because of stopping the double-spending, Infidia improves the likelihood of credit line approval. By securing finance, Infidia is solving the ancient problem of trust in small businesses.
To conclude, spending double grows business and solves the liquidity issues, too. When running a business, any case apart from pure pleasure is justified.
Thereby, for these reasons for spending, Infidia will enable and secure the finance. And that will be our pleasure.