Invoice Finance is a way of improving cash flow by releasing funds against an invoice (up to 90%) usually within 24 hours, this helps avoid the delays in getting paid often experienced by many businesses.
Invoice finance is an umbrella term used for invoice discounting and factoring products which can be tailored to a businesses needs.
BENEFITS OF INVOICE FINANCE
- By releasing cash flow in just 24 hours, invoice finance bridges the gap between paying suppliers and receiving payment from your clients.
- Invoice finance grows with your sales ledger offering you flexibility compared to and overdraft.
- Invoice finance cannot be recalled on demand unlike an overdraft.
- Credit control can be included to help manage your customer accounts.
- Invoice finance often allows you to pay suppliers quicker, buy in bulk and benefit from any volume discounts creating greater profitability.
- Certainty of payment allows better financial planning.
- Credit protection can be added to help protect you against debtor default or insolvency.
Invoice finance products :
Factoring - provides fast access to the funds you are owed by your customers (up to 90%) with a full credit control service. You don't chase the payments but still get the funds.
Invoice discounting - fast access to your sales ledger with a typical advance of up to 90%. Unlike factoring, you continue to manage your credit collection.
Small business finance - specifically for SMEs with turnover of up to £500,000. Releases up to 90% of your invoices as soon as they are raised and includes credit control and bad debt protection. Fixed monthly fees and short contract periods are standard.
Construction finance - offers fast access to working capital. Advanced against your uncertified applications for payment or staged invoices. You are not reliant on payment from your client before you can pay the bills or take on new work.
Trade finance - bridges the funding gap between paying your suppliers and being paid by your customers. Payment to your suppliers for the full price of the goods on your behalf via TT, Letter of Credit or Supplier Undertaking and payment can be made in foreign currencies. You repay the funds in 90 days.
We will use Factoring to illustrate the process:
The factoring process will involve the following steps:
- The customer places an order with the business
- The business completes the order for the customer and raises the invoice
- The business sends the invoice to the factoring provider
- The factoring provider releases an agreed percentage of the invoice value to the business
- The factoring provider will contact the customer for payment
- The customer will pay the factoring provider
The provider will advance a percentage of the invoices’ value, giving the business fast access to the cash it needs. In some cases, a new invoice could be advanced by the next working day. The below graphic demonstrates how the factoring process works between the customer, the business and the provider.
Please note that fees are charged for all of these services depending on the funder and the strength of your business.
Interested in Invoice Finance?
Our team are on hand to provide answers to any questions you may have. Call us on 01792 365 011 or click below to get a quick, free quotation.