Hi, I’m Daniel. I handle all the day-to-day operational tasks for Lulapay where I make sure every step of the application process runs smoothly to ensure we are helping customers manage their cash flow, secure stock on time, and grow their businesses.
Are you tired of waiting for customers to pay?
Invoice factoring is a helpful solution that many businesses use when they need to get paid upfront and improve their cash flow. But, you won’t get paid nearly the value of all your outstanding invoices.
What if we told you there’s a safer, cheaper, and easier way to offer your customers terms while getting paid upfront? We’re talking about Lulapay of course!
Let’s dive in.
This Article Contains:
- What Is Invoice Factoring?
- Advantages & Disadvantages Of Invoice Factoring
- What Is Lulapay?
- Why Is Lulapay A Better Option?
What Is Invoice Factoring?
Invoice Factoring is a financing option that allows a business to sell its outstanding invoices or accounts receivables to a third-party company that does invoice factoring.
This third-party company, known as a “factor” buys a business’s invoices at a discounted rate (usually 70-80% of the invoice values). The factor then goes to collect the full amount of the invoices from the business’s customers.
Invoice factoring can provide a much-needed cash flow injection into your business – allowing you to finance other costs, purchase more stock, and even pay employees.
Invoice factoring has many benefits, but there are also some drawbacks that you need to know about.
Let’s look at some of the upsides and downsides of invoice factoring.
Advantages And Disadvantages Of Invoice Factoring
Like most financing options, invoice factoring has its positives and negatives that you need to know before you decide to sell your outstanding invoices.
1. Advantages of Invoice Factoring
Here are some of the upsides to invoice factoring:
- Improved Cash Flow: Invoice factoring allows a business to receive cash upfront instead of waiting for customers to pay.
- Quick Access To Funds: Factoring can be a faster way to obtain financing than a traditional bank loan, which may involve a lengthy application process.
- No More Chasing Customer: By factoring your invoices, you pass on the responsibility of chasing customers to pay the factor. So, you can sit back with your cash on hand while the factor collects payment for the invoices.
Now, let’s take a look at some of the downsides to invoice factoring.
2. Disadvantages Of Invoice Factoring
Here are some of the downsides to invoice factoring:
- Higher Costs: Factoring fees can often be higher than traditional bank loan interest rates. Factoring companies also often include additional fees for services like credit checks or collections.
- Lower Profit Margin: Since factoring companies generally buy a business’ invoice at a reduced rate, this can negatively affect the overall financial performance of a business.
- Damaging Customer Relationships: Factoring companies are known for using aggressive collection tactics and this could damage your business’ reputation with your customers.
Now, let’s take a look at another financing option with all the upsides to invoice factoring, but none of the downsides – Lulapay.
What Is Lulapay?
Lulapay is a Buy Now, Pay Later solution for small and medium businesses in South Africa.
With Lulapay, a business can pay their outstanding invoices upfront while offering their customers extended payment terms.
So, you could send Lulapay your invoices, get paid up to the total value of your invoice, and give your customers up to 6 months to settle.
How does it work?
Lulapay can open a facility for a business, settle their invoices on their behalf, and give them up to 6 months to settle their facility.
This allows suppliers to get paid upfront, and for customers to spread the cost of an invoice over 6 months, therefore improving the cash flow of both businesses.
So, how does Lulapay avoid the pitfalls that invoice factoring faces?
Let’s take a look.
Why Is Lulapay A Better Option Than Invoice Factoring?
Here is why Lulapay shares all the upsides of invoice factoring, but none of the downsides:
- Lower Costs: Lulapay strives to provide excellent and affordable financing to every SME in South Africa. Where traditional financing institutions like banks get it wrong, Lulapay gets it right.
- Maintain Your Profit Margin: Lulapay helps businesses get paid immediately up to the full value of their invoices. It also allows customers to spread the cost of invoices over 6 months. This frees up cash flow and helps improve the businesses that so much of our economy relies on.
- Improve Customer Relationships: With Lulapay, you can offer your customers terms, therefore easing their cash flow situation. If you’ve ever wanted to make a customer happy, help improve their cash flow situation.
Lulapay: Get Paid Upfront Today
Unlike invoice factoring, Lulapay will settle up to 100% of a customer’s invoices upfront and pay their supplier immediately.
This frees up cash flow, improves customer relationships, and helps improve the lives of those businesses most vital to our economy.
Do you have any invoices that need settling?
We’d love to help! Introduce yourself to us by sending an email to lulapay@lulalend.co.za.
