Invoice Finance
Is a simple way of obtaining 80-95% of the value of your invoice raised for one of your credit customers who maybe on 30-120 day credit terms.
Invoice Finance
Many businesses run into cash flow problems while waiting for invoices to be paid, and there are simple funding options to speed up the process and reduce waiting times, which can be up to 90 days.
Invoice financing allows you to borrow cash immediately that would otherwise take a long time to access. This allows you to continue with the day-to-day running of your business without waiting potentially months for your funds to clear. Invoice finance can be especially useful if you are waiting for large cash amounts to clear, and depending on your business and the amount of invoices owed, this could amount to a lot.
There are different types of invoice finance, depending on your business needs. It is a useful form of alternative finance that is often deemed more flexible than other types of funding.
In this brief guide, we’ll try to give you an insight of what invoice finance is and, how it might be beneficial to your business.
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Different types of invoice finance
1. Invoice discounting
Is pretty straightforward: you sell the unpaid invoice to the lender and carry on as normal, without telling your client or customer that you are using a finance provider. As it's confidential, it means you continue to chase invoices and make sure your customers pay on time. The lender will advance you a percentage of the invoice, and pay you the remaining cash once the customer pays up, minus the lender's fee. This type of financing is usually accessible for established companies with a high turnover.
2. Invoice factoring
Differs from invoice discounting. In this case the lender provides a credit control, and unlike invoice discounting, you do not have to go through the rigmarole of chasing up unpaid invoices. It's not confidential in that your customers will be aware that you're using a factoring provider and they can also credit check your customers. This type of service is suitable for small business or start-ups.
3. Selective invoice financing
Gives the company more flexibility, as you can choose which invoices you need to access finance from. As the invoice is selective, you can usually access more of the invoice and then pay a fee. As with invoice discounting, this type of finance is designed for larger companies with reliable customers and a healthy turnover.
Mortgage Brokers has access to a number of lenders and can advise on the right type of invoice finance for you and take you through the whole process.
Get in touch today to find out more.
Further Reading
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The Revolution Guide to Commercial Mortgages
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Buy to Let Mortgages for Businesses
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