Advantages of Sales Ledger Financing

Sales ledger financing is gaining traction as a financing option for mid-sized companies that are in good shape financially and are growing fast. This solution is offered to companies that have outgrown conventional invoice factoring but are not able to meet the qualification requirements of a line of credit.

Sale ledger financing offers numerous advantages to businesses including the following:

Improved cash flow and increased sales

One of the most important benefits of a line of sales ledger financing is that it improves your cash flow quickly. This allows you to meet your obligations, enabling you to manage the company more strategically.

Also, sales ledger financing lines can be used for growth. Your company can now offer payment terms to clients without having to worry about the impact that slow payment has on your cash flow. This enables you to pursue strategic clients and increase your revenue when used the right way.

An easy application process

It is relatively simple and easy to apply for a sales ledger financing line and does not require all the formalities of applying for a line of credit.

Aside from submitting an application for funding, the company must include up-to-date financial statements such as:

Easier to get approved

It is easier to get approved for sales ledger financing than a line of credit. The problem with a line of credit is that meeting the qualification requirements is difficult. The company needs to have impeccable financial statements and lots of assets. It must also meet strict lending covenants and have owners whose personal assets can be pledged as collateral.

Getting a sales ledger financing line is much easier. The company must be profitable or have a short path to profitability. Its financial statements must be reasonably good, and the company must have credit-worthy commercial clients in its ledger.

Easy funding process

The funding process is straightforward. To get funded, the client submits a copy of the current ledger to the financial institution. Funds are deposited to the company’s bank account within a business day.

Competitive rates

The all-in financing rates for a sales ledger financing line are competitive. Rates fall somewhere between the rates for a line of credit and the rates for a factoring line of comparable size. Some lines have a monthly maintenance fee based on the face value of the receivables being financed.

A facility that grows with your sales

Sales ledger financing lines are flexible and designed to grow with your business. The main requirement to get a line increase is to have clients in your ledger with good commercial credit. Requests for a line increase can be processed in just a couple days.

Minimal redundant controls

An important advantage of sales ledger financing is that the facility does not have redundant controls that are built into factoring lines. This advantage makes the line more user friendly for both you and your customers.

It is designed for mid-sized companies

The facility is designed for mid-sized companies. Sales ledger financing can be stepping stone to better and more flexible financing solutions such as asset-based loans or commercial lines of credit when it is used strategically.

Sales ledger financing options

There are two main forms of sales ledger finance agreement:

  • Invoice financing: You only present those invoices which you wish to borrow against but the amount you can draw down is often much less than 90%.
  • Invoice factoring: Gives you the option to release up to 90% of your sales ledger balance but also sees you handing over credit control.

Who qualifies for sales ledger financing?

To qualify for sales ledger financing, your company needs the following:

  • Invoice a minimum of four million dollars per year
  • Have customers with good commercial credit
  • Have good sales backup documentation
  • Have good internal controls
  • Have reasonably good financial statements
  • Be profitable, or have a near-term path to profitability