Invoice Finance is a term used to describe an asset-based finance facility. Businesses sell their invoices to a funder for up to 95% of their value. Invoice finance enables your business to fund growth and working capital, while payments from your clients are being chased. Invoice Finance comes with two forms:
- Invoice factoring – Factor finance companies buy your outstanding invoices from you for up to 95% of the value of your invoice and then chase your customers for payment. The funder then provides you with the outstanding amount, their interest and fee for the service is taken out of this final balance.
- Invoice discounting – Your business retains full control over credit management and pay the funder’s advance when your clients pay you as well as a fee for their service.
A lack of cash flow can be a drain on your working capital and waiting for payments from your clients also restricts growth, with invoice finance up to 95% of the value of your invoices could be in your bank the day your invoice is raised. Choose to finance some or all your sales ledger; you can even select just a single invoice.
Invoice finance is suitable for businesses who trade business to business across a wide range of industries including recruitment, manufacturing and engineering, haulage and transport, construction, print and packaging, wholesale and distribution, and security.
By releasing up to 95% of the money due from customers, invoice finance will improve a business’s cash flow allowing them to pay wages and suppliers, reinvest in the business and fund growth. Advantages of using invoice finance include:
- Typically invoice finance will provide far higher availability of cash compared to a traditional overdraft.
- Invoice finance is priced similarly when compared to overdrafts.
- Allow your money to work for your business, reinvest, grow and enjoy early settlement discounts with suppliers.
- Invoice finance grows as your business grows, giving you far greater flexibility than an overdraft.
- Provides certainty of when you’ll be paid, means you can react more quickly to market opportunities.
The invoice finance provider can manage your sales ledger and protect you from bad debts as extra services.