Why use Invoice Finance?

The practice of Invoice Financing dates back to the 1400s but it’s evolved to become what we know it as today - a viable finance option for businesses looking for more certainty around their cashflow.

Invoice Financing is becoming a popular finance solution for businesses in the small to medium size range, allowing organisations more flexibility and freedom when it comes to managing cashflow, relieving the pressure that comes with unpaid invoices and being able to cope with the demands of payroll, unexpected energy bills and miscellaneous expenses that come with running a business.

With Invoice Finance you can access your cash from outstanding invoices within 24 hours of setting up a facility, meaning you can manage your cashflow, and your business, more effectively. Plus, funding your business through invoice finance means not taking on the additional debt that you would with a business loan.

But how does it work?

Working with an Invoice Finance provider really can relieve the pressure that comes with trying to manage cashflow in your business day to day. It provides certainty over your finances, which means you have breathing space to take on opportunities which arise to grow your business.

There are two approaches: Factoring and Invoice Discounting

With Factoring, you outsource your credit control function to the Invoice Finance provider.  A dedicated credit control team will liaise with your customers over missing or late payments on your behalf, collecting your outstanding invoices, freeing up your time to concentrate on running and growing your business.

With Invoice Discounting, your credit control team maintain the relationship with your customers. Your customers will not be aware that you have an Invoice Finance partner.

The advantages of working with an Invoice Finance provider can lead to:

• Better cashflow
• Quicker access to money
• The ability to grow your business when opportunities arise

Partnering with an Invoice Finance provider means you get access to your cash faster than if you were waiting between 30 and 90 days for payment from your customer.

As soon as an invoice has been issued to your customer, the Invoice Finance provider will release the agreed amount of money into your account – up to 100 per cent minus any agreed fees.

Qualifying for Invoice Financing

Your initial discussions will be around checking that you qualify for an Invoice Finance facility, with a key criteria being that you trade with other businesses. The Invoice Finance provider may also be interested in your invoicing history, familiarity with your business sector, your own business sector experience and likelihood of growth, because as you issue more invoices and grow your business, so your access to cash increases too.

Key things to remember about Invoice Financing

• You have better control over your daily cashflow allowing you to make decisions on where the cash should be allocated.
• You get access to your cash faster than if you’re waiting for your customer to pay you – if you choose Factoring, the Invoice Finance Provider handles your credit control.
• As your sales invoices grow, the amount of cash you can access increases too.
• If you’re a larger business with a Credit Control team, you may choose to look at Invoice Discounting instead – you retain control over your invoicing and collections process, but your Invoice Finance partner advances a percentage of the funds to you against the unpaid invoices. The difference here is you are tasked with chasing the payment, not the Invoice Finance provider.
• Many businesses that use Invoice Finance also choose bad debt protection to make sure that they still receive payment if their customers can’t settle their invoices.