Funding Solutions

Invoice Finance and Factoring

Speaking to one of our expert advisors is free of charge and could put you back on the right path and your mind at ease

Get confidential advice now

What is invoice finance?

Invoice finance is a form of asset-based lending, where funding is provided against the value of sales invoices. Invoice finance bridges the gap between raising the invoices and when the customers pay, by essentially “selling” the invoices to the invoice finance company immediately once raised, for a cash value.

If you have found that your business cash flow is often impacted by the delay in receiving customer payments, then you may find invoice finance very useful in providing you with upfront working capital to ease your cash flow and provide access to funds to enhance growth.

There are two types of invoice finance:

  1. Invoice factoring
  2. Invoice discounting

What is invoice factoring?

Invoice factoring is a financial product that allows businesses to sell their unpaid invoices to a factoring company. The factoring company will purchase the invoice and advance an agreed percentage of its value (inclusive of VAT) and then deal with the responsibility of collecting the payment from the customer. Once payment is received, the debt to the factoring company is discharged together with any fees, and the remaining balance is credited to the business’ client account, available to be drawn down by the business.

The main benefit of invoice factoring is that it is an excellent way of speeding up incoming cash flow, as one of the main problems faced by small and medium businesses is prompt payment of invoices. Additionally invoice factoring lifts the burden of ongoing credit control away from the business, into the hands of the factoring company, who will collect in the payments due from customers.

What is invoice discounting?

Similar to invoice factoring, invoice discounting again involves a business having an agreement to sell their unpaid invoices to an invoice finance company. However, the business retains the credit control function and continues to be responsible for dealing with customers and chasing payment, which is then paid directly into the invoice finance company’s client account (rather than to the business).

It is possible to operate a confidential invoice discounting facility with most lenders in this market, meaning that customers need not be aware that you are utilising a finance company to support the ongoing trading of the business.

Invoice finance is a flexible cash flow option and can be adapted and changed to suit the business’ individual needs; as the business grows and generates increased sales, the facility will be able to grow with the business. This makes it a more viable alternative to other traditional forms of finance like overdrafts and loans.

Find out more about invoice financing and factoring

If you’re a small business or a startup, invoice financing and factoring can be a useful way of ensuring that cash flow never becomes a problem. Our team can help you figure out the best path for your company, one that is going to ensure the best results for you. Visit our contact us page and fill in the form to get in touch or give our team a call on 0800 731 2466.

Get in touch