How do late invoice payments affect growing Hong Kong businesses

Posted by Andy Chan on Jan 31, 2018 2:53:30 PM

The Hong Kong economy is heavily based on the businesses of small medium enterprises (SMEs), which contribute to 98% of total business enterprises.

Challenges of Maintaining Business Growth

The growth of these SMEs depend largely on the efficiency and profitability of the company. That is, the company must use its funding and resources effectively to ensure greater growth in its business.

However, companies often find themselves unable to handle finances efficiently due to late invoice payments. In fact, of the 330,000 SMEs in Hong Kong, it is reported that over 45% of them are affected by payment delays from customers for over two months or longer.


Problems of Late Invoice Payments

Late invoice payments hinder the business’s ability to invest, hire new staff, purchase new equipment, and to further advance itself. It is even reported that late invoice payments can lead to the drying up of the company’s funding and the stoppage of cash flow, pushing companies on the edge of closure at times.

In Hong Kong, payments generally take place between 30 to 90 days, which may make it challenging for some companies to maintain a stable cash flow. It may cut into the efficiency and productivity of companies and will take a toll on the competitiveness of the company in the market.

Why companies use alternative funding and invoice finance

To ensure that a company can run smoothly to maximize profits, it is crucial for one to maintain a stable and healthy cash flow for their business amidst overcoming other challenges. Although there is a myriad of funding methods available to businesses, more and more small medium enterprises (SMEs) are turning to alternative funding - invoice financing.

The Fall of Conventional Approach

Ever since the financial crisis in 2008, traditional institutions like banks are reluctant to issue funds and loans to SMEs. These previously bigger players of lending market now view startups and small companies as risky investments when compared to bigger and more well-established companies.

It has only been more difficult for SMEs to acquire a loan from traditional institutions in time for their operations, creating a gap for alternative finance providers to step in.

The Invoice Financing Option

Invoice financing is a traditional alternative funding method, allowing many SMEs to acquire loans and funds in time for their businesses. However, the traditional method may be considered slow and expensive, often causing companies to be locked in for at least 12 months. Many SMEs may rather use other funding options due to its inefficacy and complications.

Meanwhile, Qupital brings a contemporary twist to invoice financing, expediting the process of acquiring funds for the SMEs’ businesses.


How Qupital Works

Qupital provides an online invoicing trading platform that grants immediate financial relief to SMEs by connecting them with potential investors:

  1. Sellers upload their outstanding payment invoices onto the Qupital platform and set the maximum cost of capital for an online auction.

  2. The diversified pool of investors will bid on the uploaded invoices and provide a discount rate for the invoice.

  3. The invoice will be sold to the buyer providing the lowest discount rate.

  4. The business will receive the funding within 24 hours.

If you are looking for immediate relief on cash flow, we can help.

Topics: Loans, SME, Hong Kong, Funding, Qupital

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