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Why Wait? Get Your Invoices Paid Today With Invoice Finance

How does Invoice Finance work?
 

If you or your business have outstanding invoices which are yet to be paid, they can be transferred to a third party for a fee; this is invoice financing. 

The invoice financing company that agrees to buy your invoices, called an invoice financier, might be an independent specialist or could be part of your bank or another High Street financial institution.

The typical process involves:

1. Get A Quote

Get a quote from the invoice financing facility.

2. Send Your Details

Send in the invoices for which you’d like funding.

3. Verify

All your details will be checked and verified.

4. Get Paid

Once approved, you’ll have access to funds quickly and securely.


Should you consider this as a finance option?
 

Invoice finance can allow you to release the funds which are currently locked up in your outstanding invoices. Rather than waiting a month or more for an invoice to be paid, you can receive up to 80% of an invoice’s value in as little as 24 hours.

Invoice financing offers you greater flexibility by providing faster access to capital, making it an excellent solution for small businesses. However, this option carries a cost, which can be comparatively expensive.

So, if you are being driven to consider this route by the need to access cash in the short-term, you should consider other finance solutions too, all of which can offer short-term funds when needed, such as:


Need more information? Contact us today; we will review your requirements and advise if we think invoice financing meets your specific circumstances.
 

In the UK, two basic types of invoice financing are available, factoring or invoice discounting.

Factoring


This usually involves transferring your entire sales ledger to the invoice financier, who will pay you a percentage of the invoice value within 48 hours (usually around 85). They then take on the responsibility for collecting the money owed by your customers.
 

Advantages

  • You free up the time you currently spend managing your cash flow to focus on other aspects of your business.
  • Potential customers will be credit checked by the finance company, so you’re likely to trade with customers that pay on time in the future. However, the financier might refuse to accept a potential customer.


Disadvantages

  • Your customers will know if you use invoice finance, and they might prefer to deal directly with you.
  • Factoring can affect the image of your company. It could be interpreted as a sign of a cash flow problem.
  • The financier usually keeps a percentage of the invoice value to pay for their service, so you will lose that part of your income. Usually, a final settlement is paid to you for part of the remaining balance after the financier deducts their fees and interest. The exact amount depends on which invoice financier is used and the creditworthiness of your customer.


Invoice trading
 

Invoice trading uses an online platform to obtain finance from individual investors (or groups of investors) in a similar way to peer-to-peer lending. It means you don’t have to sell your entire sales ledger to a factoring company.
 

Advantages

  • You get to pick and choose what invoices to sell (so there’s no need to outsource debt collection for the entire sales ledger). For example, if you have one customer that demands very different credit terms, you can choose to trade their invoices alone.


Disadvantages

  • The customer you want to trade with might prefer to deal directly with you.
  • This type of invoice finance can also affect the way customers perceive your financial strength.
The Lending Channel are members of the National Association of Commercial Finance Brokers (NACFB).
2/1 King James VI Business Centre, Friarton Road, Perth, PH2 8DY
Tel: 01738 583008 | Fax: 01738 500402

The Lending Channel are authorised and regulated by the Financial Conduct Authority.
Company number SC334818
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