What is Invoice Financing and How Can it Help Your Business

What is invoice financing?

With Invoice Financing you can boost your cash flow by raising a lump sum of capital which can be immediately to be reinvested into your business.

As you raise your sales invoices and send them to your clients you also provide a copy to your invoice finance provider. They will then make a payment to you of up to 90% of the invoice value straight away. The balance, less charges, is paid when your client settles the invoice.

Another great benefit is you don’t need to chase the client for payment, the invoice finance provider will do it for you.

This means you no longer have to wait for 30, 60 or even 90 days plus for invoices to be paid.

Instead you will receive payments within 24 to 48 hours of your invoices being raised. Effectively cash on delivery for you whilst you still offer your usual credit terms to your customer.

There are three types of invoice finance, these are factoring, invoice discounting and spot factoring (also known as selective invoice finance).

Here is a quick overview of how invoice financing works:

• You receive up to 90-percent of an invoice within 24 hours – no need to wait for invoices to clear.
• Maintains your working capital – Access working capital that has become tied up in Invoices
• Take advantage of professional sales ledger management – A truly professional dedicated client manager will handle your sales ledger for you, no need to employ in house
• Save time – With the facility being online, there is always a place to check the current state of your invoices
• Protect yourself against bad debt – Credit protection that guards you against late or non-payment of invoices

All you need to do once setup is – Send your invoices after you’ve raised them, your provider will give you the funding, making it easier to meet day-to-day financial commitments. When invoices are due, they are collected on your behalf from customers.

It’s really that simple.

The different types of invoice financing:

Factoring

When Factoring, as described above, you continue to raise and dispatch invoices in your usual manner, sending a copy to your factoring company.

Upon receipt your factor will then make funds available to you of up to 90% of the invoice value. These funds may be used immediately.

When your client pays, the outstanding balance will then be paid to you, minus the charges for the use of the facility.

The factoring company will manage your sales ledger for you and carry out the credit control on your behalf. This removes the often time-consuming and awkward task of chasing your customers for payment and leaves you free to focus on running your business.

Invoice discounting

Invoice Discounting works exactly the same way as Factoring in that you are able to draw money against your invoices in advance of your customers paying. The difference is that you retain the credit control function in house and continue to handle the collections yourselves.

With Invoice Discounting it is generally provided on a confidential basis so that your clients are not aware of how your business is being financed.

Spot factoring

Spot factoring offers you the flexibility to pick and choose which invoices you use to raise the working capital your company needs.

Traditional invoice finance has always required all business-to-business invoices to be passed to the invoice finance provider and generally has a minimum period of six months plus.

With spot factoring there is no minimum contract period. You can use this service just once or more frequently to meet the cash flow requirements of your business.

Invoices which are to be funded are passed to the spot factor. They will make a payment of up to 90% available to you, again with the balance being payable less charges when the invoice is settled.

As with invoice discounting some providers will consider making this service available on a confidential basis.

Let us find the right invoice finance deal for you or call us now on 01472 254914.