What is invoice finance?

Invoice finance provides access to funds that would otherwise be tied up in outstanding invoices for clients. Instead of waiting months to receive payment from clients, invoice financing allows you to advance a percentage of your invoice’s value. On average, you can access between 65% to 95% of your invoice value, allowing you to immediately invest it back into operations.

Types of invoice financing

Invoice factoring

With invoice factoring, you will no longer need to chase your clients for unpaid invoices. Instead, the finance provider will offer credit control services, taking full responsibility for your invoices. They will send you up to 95% of the value of your invoice within 24 hours. The remaining balance will then be sent once your customer pays, minus any interest and fees from the finance provider.

Invoice discounting

With invoice discounting, you will remain responsible for your own credit control and sales ledger management, meaning you will still have to chase clients for unpaid invoices. Instead, the finance provider will assess the creditworthiness of your clients and send you an advance on your invoices. Once you receive payment from your customers, you will repay the finance provider, along with any interest and fees.

Selective invoice finance

With selective invoice financing, you will choose specific customer accounts or invoices you would like to finance. With no long-term commitment between you and your finance provider, you can simply access their services when you require them. This should provide you with more control over your cash flow management, allowing you to address short-term funding needs.

Benefits & Disadvantages of invoice financing

Benefits

• Improved cash flow
• Increased working capital
• Reduced credit risk
• Flexibility and scalability
• Quick and easy set-up
• No personal credit checks
• Typically no personal guarantees

Disadvantages

• You’re depending on your customers paying
• Short-term costs
• Confidentiality
• Long-term costs
• Loss of control
• Impact on credit report
• Customer relationship

Invoice Financing Eligibility

• Are you an established business with a trading history?
• Do you have detailed and accurate financial statements covering your trading history?
• Do you provide goods or services to other businesses, not consumers?
• Do your customers have a good record of paying bills?
• Do your customers pay invoices within 30 to 90 days of you issuing them?
• Are you looking for less than £1 million?