Default Risk
1. Invoice advance and promissory note discount against delinquency.
have you thought about him invoice advance as a preventive measure against the risk of non-payment?
In times of inflation and economic crisis, delinquency increases and becomes a threat to companies and the self-employed.
Typically, late payments lead to closure and bankruptcy of the business. When liquidity and treasury disappear, survival is impossible.
Therefore, you must be prudent and adopt preventive measures from the outset.
In this article, we will recommend alternative financing options to prevent this problem.
2. Delinquency and non-payment, a real danger
The invoice advance and the promissory note discount are two concepts that you should familiarize yourself with as soon as possible.
Why?
We explain it to you with an example:
Imagine that you get a new client who entrusts you with a very important service valued at several thousand euros. To carry it out, you buy material and hire various services from your suppliers. Consequently, You acquire payment commitments with specific maturities.
In parallel, you have agreed a payment plan with your new client and since you dedicate a good part of your resources (staff, machinery, time...) to carrying out this assignment, you temporarily put other projects on hold.
At one point, your client's subscriptions start to fail.
Not having used the promissory note discount nor invoice advance, your economy falters. Suppliers claim their charges, employees their payroll and your income is below what was expected.
Unless you have some good savings, the problem requires obtaining financing. However, in the current economic situation, banks tend to deny it if the solvency is not guaranteed. And yours depends on a defaulter.
In the best of cases, you get that financing in exchange for excessive interest. Consequently, you lose a part of the income that you were counting on and, perhaps, you had already assigned or committed to a specific purpose.
3. How to avoid default risks
We propose you to act in the following specific lines:
– Customer selection. Do not trust anyone, find out about their economic history and gather all the necessary information before accepting important orders. Sometimes giving up on a juicy project is a heroic decision.
– Advance payment policy. Ask to be paid in advance as much as possible. You have to cover as soon as possible, at least, the expenses generated by the order. If you identify a delay in any of these subscriptions, put the activity in Stand by until collect.
– Alternative financing. It is the best option to avoid greater evils. He invoice advance and promissory note discountThey are very interesting options.
4. Bill Advance and Other Applicable Alternative Financing Options
Both the invoice advance for freelancers and companies like the promissory note discount They are alternative financing formulas. Basically, they consist of reaching a agreement with an intermediary to pay those invoices or promissory notes before they are due.
Now, you must take into account a fundamental aspect when signing these agreements.
If you accept them without recourse, the other party assumes the risk of non-payment.
That is to say, once the agreed proportion of the invoice has been advanced to you, you will no longer have any collection problem. If it occurs, the financial institution will be the party harmed by the defaulter.
Thus, this modality without recourse in the promissory note discount and invoice advance for freelancers or companies protects you a lot, because
The danger of non-payment disappears for you!
However, its cost is higher when signing these recourse financings
Consequently, this kind of alternative financing is a real shield against delinquency.
Through the invoice advance for freelancers or companies and the discount of all your promissory notes, you can dispose of current without waiting for maturity.
Don't you think it's worth informing yourself about these options without obligation?
At Workcapital, we will be happy to help you and build tailor-made financing focused on your needs with you.
Call us and we will inform you without obligation!
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