We're Invoice Finance specialists
Get up to 90% of your invoice value paid into your bank account immediately with Invoice Discounting or Factoring - not the 67 day average it takes for UK businesses to get paid!
Our Invoice Finance service
- Rates start from 0.5%
- Available to new start businesses
- A quick, safe source of cash flow
- Spend less time on administration and chasing debt
- Get 90% of invoice value immediately
- Invoice factoring
- Invoice discounting
- Selective invoice finance
Leverage your unpaid invoice as security for funding, giving you quick access to a percentage of that invoice’s value quickly.
This method of funding lets you access finance for cashflow or investment purposes, using an often-untapped asset on your balance sheet.
A comprehensive guide to Invoice Finance
Invoice finance is a type of short-term finance relating to credit sales. It is also known as accounts receivable financing. It is a method of obtaining money that is owed by customers.
It allows a business to bridge the gap between the time goods or services are delivered to the customer, and when they are paid for. Invoice Finance is a form of collateral loan, and involves the financial institution providing a loan to the business on the basis of its outstanding receivable invoices. The business is then loaned a percentage of the value of the invoices, usually around 85%-90%.
The customer is given an amount of time to repay the invoice, usually between 30-90 days.
Contents
Characteristics and features of Invoice Finance
- Invoice Financing is a short-term loan against unpaid invoices.
- It does not hold the same risk level as traditional loans.
- The loan amount is based on the value of the invoices rather than the company’s credit rating.
- It is a faster way of obtaining the cash owed by customers.
- It is a more cost-effective way of funding the business.
How does Invoice Finance work?
Invoice Finance works by allowing a business to receive an advance on the money they are owed.
The invoice finance company will purchase the outstanding invoices for a fee, and then advance a percentage of the invoice value to the business. The customer can then be given a set amount of time to pay the invoice, usually 30-120 days.
The business will then repay the loan, plus the fees to the invoice finance company, when the customer pays the invoice.
The different types of Invoice Finance
There are three main types of invoice finance available:
Invoice factoring
This is where a business sells its invoices to a third-party factoring company. They then take responsibility for collecting payment from the client and give the business an advance on the invoice value (usually around 80-90%). Once the invoice is paid, the factoring company gives the business the balance, minus their fees.
Pros: Cash flow is immediately improved, and the hassle of chasing payments is removed, as the factoring company deals with it.
Cons: The cost of factoring is usually higher than other types of invoice financing, and the factoring company takes control of the debt collection process, which could have an impact on the relationship between the business and its clients.
Invoice discounting
This is similar to factoring, except the business retains control of the collection process. The business sells its invoices to a third-party lender, who then gives them an advance on the invoice value (usually around 80-90%). Once the invoice is paid, the lender gives the business the balance, minus their fees.
Pros: The business retains control of the debt collection process and can maintain their relationship with their clients. The cost of invoice discounting is usually lower than factoring.
Cons: The business still has to manage the debt collection process and may not have access to the same level of support as factoring, as the lender is not responsible for collection.
Selective invoice finance
This is where a business choses which specific invoices they want to finance, rather than factoring or discounting all invoices. The business sells selected invoices to a third-party lender, who then provides an advance on the invoice value (usually around 80-90%). Once the invoice is paid, the lender gives the business the balance, minus their fees.
Pros: The business has control over which invoices they finance, which can help to reduce costs. It also offers flexibility.
Cons: Selective invoice finance can be more expensive than factoring or discounting all invoices, due to the added complexity.
Who can use invoice finance?
Invoice Finance is available for all businesses regardless of size, and can be used for companies from start-ups to large enterprises.
It is particularly helpful for businesses that depend heavily on customers paying their invoices on time. It is also helpful for businesses that experience cashflow issues or need to rapidly increase their working capital.
When can Invoice Finance be used?
Invoice Finance can be used in many circumstances, such as when a business is waiting for payment on outstanding invoices, or when a business is expecting a large invoice that needs to be paid in a timely manner.
It is also useful when a business needs to make large payments, and when it needs to access extra working capital.
Benefits of Invoice Finance
- Gives access to cash within hours/days.
- Helps improve cash flow.
- Allows businesses to make use of their customers’ outstanding invoices to obtain funding.
- Reduces the risk of non-payment from debtors.
- Is simpler and faster than a bank loan.
- Has flexible loan repayment terms.
- Can help a business grow.
- Allows businesses to retain control of their customer relationships.
- Reduces the burden of debt collection.
Conclusion
Invoice financing can be a valuable option for businesses that need to improve their cash flow.
However, it's important to consider the pros and cons of each type of invoice finance and assess which one is appropriate for your business needs. Eligibility criteria can vary depending on the lender, but generally, businesses will need to have a reasonably good credit rating and be in good financial health.
Overall, invoice financing can be an effective way to manage cash flow and improve business growth.
We're experienced financial experts who arrange invoice finance, securing you the best deal from lenders in the UK.
Get expert assistance today, we're on hand to answer any questions about invoice finance.
Call our friendly team on 01202 612934, we're ready to help.
