Invoice finance

Managing your cash-flow

What is invoice finance and how it can benefit your company?

Invoice finance is a range of asset-based finance facilities when a business sells their invoices to a third party for a percentage of their value. It is useful when dealing with companies that have a long payment terms or are slow in paying their invoices.

Types of invoice financing

  1. Invoice factoring
  2. Invoice discounting
Invoice finance

How does invoice finance work?

Invoice Factoring

The invoice factoring sometimes referred to as “factoring” or “debt factoring”, allows businesses to sell the unpaid invoices to the third-party company (a factor). The factoring company pays the percentage of the invoice to the business and then takes responsibility for collecting the payment. The company that owes money will pay the value of the invoice directly to the factoring company.

Invoice factoring makes debt collection easier and speeds up the payments process improving the company’s cash-flow. The downside of the invoice factoring is that you must tell your contractors that they will have to pay the invoice directly to the factoring company, which might put a strain on the business relationship.  

The cost of the invoice finance will vary, depending on the sector, turnover and value of the invoices but usually between 1.5% – 5% per month. It will also depend if the finance is for one invoice or batch. The factoring company will typically pay an advance of up to 80% of the value, and the remaining 20% when the invoice is paid, minus fees. Since the business needs to pay fees for the factoring, it works better for companies that have a high-profit margin.

Invoice Discounting

Invoice discounting is another form of alternative finance, helping companies to manage their cash-flow. Invoice discounting is allowing businesses to obtain short term finance secured on their unpaid invoices. This is a more flexible option than factoring and it can adapt to the changing environment and business growth. It is also sometimes called discreet.

Invoice discounting allows companies to control their payments process yet receive a short term advance on the unpaid invoices. This is more discreet financing, which would not have any impact on the relationship between businesses and it could provide more cash than typical overdraft facility. Companies using invoice discounting would not need high-value assets to secure additional funding.

Companies that can benefit from invoice discounting are recruitment, construction, manufacturing, transport or wholesale, those with higher profit margins, and good credit control process. Usually, the invoicing company will open a credit line based on the invoice value and charge monthly fees for management, and interest rate when the business draws money. This form of short term funding is more expensive than a traditional business loan.

How do I apply?

Apply online

Simply complete our online enquiry form, fill out information about you, your business and your funding needs. To qualify for funding your business must be registered and trading in the UK.

We'll contact you

We will call you to find out more about your requirements. Based on the information, we will match you with suitable funding providers and provide you with an initial quote. 

Decide in your own time

Decide in your own time to accept the funding or not. Our funding provider will contact you to arrange your loan.

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