Pakistan’s business environment is known for its challenges ranging from political instability to economic volatility, limiting expansion and development of businesses. On top of that such internal and external shocks to the fragile economy like catastrophic floods, rising interest rates, soaring inflation, and an unfavorable global environment are projected to pull down growth rate to less than 2pc during the present financial year compared to nearly 6pc last year. The massive currency depreciation from 179 to a dollar to 287 a dollar over the last one year has brought additional pressure on the businesses. As a result, many businesses are struggling to keep up with their expense, payrolls, and other financial obligations due to slow-paying customers, unexpected expenditure, or other financial challenges. The businesses are adversely affected by the economic downturn resulting in large layoffs of up to 30pc of their workforce. Cash flow issues are a common problem faced by both small and medium-sized enterprises (SMEs) and big corporations every day in the current difficult economic environment. The inability to pay suppliers, employees, and creditors on time can have a significant impact on the day-to-day operations of a business and even lead to bankruptcy. However, there is a solution that can help businesses overcome their cash flow problems and stay afloat known as invoice factoring, which can be a game changer as it has been assisting businesses of all sizes to better manage their working capital and cash flow. Fintech ABHI is one startup in Pakistan that is providing Invoice Factoring to many businesses under its brand name, Abhi Factoring. It is a financial solution for the businesses in distress and has transformed how the businesses access more capital. With the help of this service, the businesses can borrow money against their future cash flows or accrued invoices to improve operations, lower their costs and have more control over their cash flows. It also helps in increasing flexibility. Unlike traditional financing solutions, invoice factoring does not require collateral or a long-term commitment, which provides businesses with the freedom to access the funds they need quickly. The service is empowering Pakistan’s startups to scale and succeed. Fasih Ahmed, head of corporate & alternative distribution channels at Find My Doctor says the invoice factoring services provided by ABHI have enabled his startup to optimize their operations and reduce overall costs. “Managing cash flows can be a challenge for startups. But ABHI’s services credit line provided to us has proved to be a lifesaver by helping us, giving us more control over our cash flows by optimizing our cash flows and reducing costs.”
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Invoice factoring can also support the textile industry that has been in distress because of the local and global economic downturn and save jobs by solving immediate cash problems of the companies. A new idea in Pakistan, invoice factoring gives a company in difficulty a speedy infusion of cash to be used to pay suppliers and employees, and invest in new equipment. It also helps the businesses avoid the requirement for bank financing, which can be challenging in difficult economic conditions, and lowers the danger of default and bankruptcy due to cash flow issues. By ensuring timely payments, invoice factoring can assist businesses in maintaining their relationships with suppliers and customers. In conclusion, invoice factoring has become a potent financing option that enables businesses to overcome financial barriers and succeed. No wonder, an increasing number of companies facing financial problems are now turning to invoice factoring as a potential solution to their cash troubles.
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— The writer is an economist and financial consultant. He can be reached at [email protected]. The Nation, 02 Apr, 2023