At present there are around more than 60 million Small and Medium Enterprises (SMEs) in Indonesia. Many of these SMEs are conducting Business-to-Business (B2B) transactions, where in the transaction process there will be an invoice as a form of payment for the goods / services that have been provided.
One obstacle for entrepreneurs and business people is to wait for payment from this invoice. In fact, they need these funds to be used again as working capital or developing a business. If too many customers from SMEs are late paying invoices, then the cash flow or flow of funds from the SMEs will be disrupted. However, what if the payment invoice can become a fast fund for your business?
Invoice financing is an alternative financing with invoices as collateral. These funds can be used to resume business operations. In addition, these funds can also be used to develop business. Thus, the use of invoice financing can be maximized to get more flexibility in managing the flow of funds.
Then, what is the difference between applying for a loan using Invoice Financing and applying for a loan at the Bank.
By using invoice financing as a guarantee, it will make it easier for you to apply for a loan, because if you submit a loan at the bank, the process will be longer and more difficult.
When a business proposes a loan at the bank, usually the bank will ask for collateral in the form of fixed assets such as land & buildings. Collateral like this is usually not owned by most SMEs in Indonesia. In conditions like this, invoice financing plays a role in helping SMEs.
Every UKM that has a B2B transaction will usually have an invoice, so invoice financing opens up greater opportunities for these SMEs in getting business loans because it is only enough to guarantee the invoices.
What are the benefits of Invoice Financing?
Usually the income of entrepreneurs is bound in invoices that have not been paid, so their financial flows can be affected. When financial flows are not good, there are many negative effects that can arise, such as UKM will have difficulty in financing their operational activities. Opportunity costs will also arise because SMEs will not be able to pursue other projects due to lack of funds due to being stuck on invoices that have not been paid.
With the invoice financing, your business can continue to run well and the financial flow can also be smooth. While invoices have not been paid, SMEs can still pursue other projects with working capital borrowed using invoice financing. With this, opportunity costs can be reduced and SMEs can develop further.
In processing loans, Invoice financing also does not require a long time to process.
Invoice Financing Process in Acceleration
One of the invoice-based business loan providers is the Peer-to-Peer (P2P) Lending Acceleration platform. More than 50% of the value of the SME loan portfolio in Lite Lending uses invoice financing.
If an SME already has an invoice, the SME can immediately register at the Acceleration and apply for a loan. After the invoice has been analyzed and declared worthy of a loan, the loan will be processed immediately. Usually prospective borrowers will get a loan of at most 80% of the invoice value.
For loan interest, the average is around 18% -21% per year. Although at first glance it looks great, but because SMEs usually borrow between 3-6 months, the borrowers only incur interest costs around 4.5% – 9%. Other costs that need to be incurred are Origination Fee of 0.25% per month. If you borrow between 3-6 months, the cost of origination fee is only between 0.75% – 1.5%.
So, with invoice financing, SMEs will be able to get business loans more easily with relatively affordable costs.
What kind of borrower is it used to submit?
Borrowers are usually in the form of SMEs that are difficult to get loans from banks because of the absence of fixed assets as collateral, transacting on a B2B basis, and have invoices to be paid by their customers within a certain period.
Additional criteria for prospective borrowers namely the business must have been running for at least one year and already have a profit. Then, added supporting documents such as annual financial statements that include profit and loss statements, checking accounts for the last 3 months, and Trading Business License (SIUP).
After completing uploading the document, the next process is the analysis and selection of credit scoring.
Because Lite Lending uses a crowdfunding system, invoice financing is provided by the wider community, including you, as the crowd investor. By providing loans through invoice financing, you directly participate in helping the company to develop its business, while also benefiting from returns of an average of 18% -21% per year
You do not need to worry, as mentioned above Lite Lending has done a fairly tight selection for borrowers who apply for loans using invoice financing. This invoice is also useful as collateral, so that you as a lender get more security. With a low minimum loan nominal, starting from $100,000 alone, you can manage your lending risks more flexibly.