Invoice financing allows for businesses to have a percentage of their invoices paid to them upfront without having to wait the 30-60 or even in some cases 90 days as per their payment terms with their customers. This solution releases up to 90% of your invoice value within 24 hours of being issued with the remainder then passed across once you have received payment from your customers, minus the fees of the invoice factoring company for providing this service.
What are the two types of Invoice Financing?
There are two types of invoice funding; invoice factoring and discounting. Factoring is typically used by small and medium sized enterprises and lets you select which invoices you wish to finance. This facility can also include a dedicated sales ledger management service that can add expertise to your credit control process as well as allowing you to concentrate on your core business activities. There is also bad debt protection available as an added service safeguarding your business from the threat posed by bad debts and defaults.
Factoring works by raising the invoice and advancing 90 percent of the value. Once this process has taken place, the customer will pay the factoring company directly. The remainder of the invoice available (minus the factoring companies agreed fees) will also be paid.
On the other hand invoice discounting, which is usually used by larger companies, will let all your invoices be financed automatically, upfront bridging the cash flow gap of trading on credit terms. The way it works is alike factoring, however you collect the payment from the customer yourself rather than the customer paying the factoring company directly. The rest of the steps, as mentioned above, are the exact same.
Types of businesses that use invoice financing
There are numerous advantages to using invoice financing and that is why most enterprises wish to use it. However, there are some basic requirements businesses have to acquire before we can confirm that a company is suitable to use invoice financing. For instance, it is usually businesses that provide products and services to other businesses who are able to benefit from invoice financing. However, if you feel you are entitled to use invoice financing, you can enquire today, and we’ll assess your company’s viability and discuss other potential financing options.
Invoice financing is used in various areas of business. Some of these include: Wholesale, recruitment, security films, professional services, printing and publishing, logistic industry and export, manufacturing companies and construction businesses with large long-term/ongoing contracts.
Advantages of Invoice Financing
If you want to access funding within 24 hours and release up to 90% of your invoices; Invoice financing may be for you. Cashflow is immediately available for you meaning you can avoid costly expenses and late fees, such as on-due bills and missed early repayment discounts. Also the amount of funding you receive ultimately depends on how fast your business grows. Therefore the more your business increases, so does your funding levels.
Unlike other funding options such as bank loans, your suitability is based on your dealings with creditworthy companies not your business credit score, thus making invoice funding much simpler to use. In addition to this, invoice financing also includes security so that you are protected from bad debts; other funding options will most likely not incorporate this.
We are here to support and assist your cash flow management. Our main priority is to take any stress and confusion from your behalf and ultimately help you improve your credit rating.
Benefits of Invoice Discounting and Factoring
Discounting: An advantage of discounting is that it is ultimately cheaper than factoring, making it an affordable alternative to other types of financing. However you must keep in mind that all debtors must and will be financed, especially for larger corporations.
As well as this, with discounting you are able to bridge the gap of cash flow between paying suppliers and getting paid. Credit control is kept in house, allowing you to manage your client relationships, whilst ensuring confidentiality from your customers.
Factoring: Is more flexible than loans and overdrafts, funding grows in line with your business. In addition, factoring can also provide you with credit control expertise, which helps to reduce any inhouse overheads and improving invoice collection times. You can also secure discounts from your suppliers with improved cash liquidity.
Are you eligible for Invoice Financing?
Do you think you are eligible for invoice financing? If so, contact us today and we’ll evaluate your circumstances and suggest whether your business is viable or not. If you are not, don’t worry we will advise other options available for you, so you can make a profitable decision. However, there is a general criteria that you must attain in order to confirm your suitability for invoice financing.
If you have some of the following, you have a high chance of approval to be able to use invoice financing; Good debtor book, financial statements, B2B businesses, invoice raised on completion, proof of debt and credit terms with customers.