If you regularly invoice businesses, you could benefit from invoice finance by releasing capital locked up in unpaid invoices, in as little as 24 hours.

What is invoice financing?

Invoice finance is a way for a business to free up cash flow borrowing money based on what your customers owe to your business. The concept is simple, a business can choose to ‘sell’ their unpaid invoices to an invoice financing company, and in exchange, the invoice finance company will lend the business up to 90% of the total value of one or multiple invoices depending on how much working capital is needed. The remaining 10%, minus fees, is provided to the business once the invoice has been paid by the customer.

Invoice finance is a popular type of borrowing for small and large businesses as it is seen as ‘selling’ an asset to free up cash as opposed to taking out a loan or another form of debt finance to access funds.

What are the different types of invoice finance?

There are two forms of invoice finance available to businesses who want to raise finance against their invoices. The main difference between them is who handles credit control.

Invoice Factoring

Invoice factoring is the product where the lender takes control of the whole process, by providing ‘credit control’ services to ensure your customers pay on time. Having more time to run your business instead of chase late payments, could really benefit your business, however, it does mean that your customers will know that you’re using a factoring provider.

Invoice factoring can be easier to secure than invoice discounting, making it a plausible choice for start-ups and early-stage businesses.

Invoice Discounting

Invoice discounting is where the borrower keeps control of the ‘credit control’ aspect and must continue to collect on their customers’ payments. This allows the borrower to keep their finance arrangement confidential, but due to the more hands-on approach it demands, it’s generally only available to more established businesses with a high turnover.

Another consideration of invoice discounting is that the lender may require you to finance your entire debtor book, rather than picking and choosing specific outstanding invoices, making it less flexible than factoring.

Selective Invoice Finance

Selective invoice finance and spot factoring are part-facility products, and because of this, can offer more flexibility. Selective invoice finance allows you to choose specific customer accounts to finance, while spot factoring allows you to choose specific invoices. These facilities are a good fit for businesses with a clear idea of how much money they need but are notoriously harder to secure than factoring or discounting.

All three have their benefits, but if you’re keen to keep your borrowing anonymous to your clients’, invoice discounting is likely to be the preferred option. Across all forms of invoice finance, you’re able to keep the facility open for as long as you like, borrowing as much as you like by uploading invoices to your invoice financier’s online account.

Which type of invoice finance is right for my business?

Invoice finance is best suited to businesses which provide services or goods to other businesses and which need steady cash flow in order to pay everyday running costs of the business. The convenience factor of invoice finance means it suits a lot of businesses as once set up, it’s easy to dip in and out of the facility as and when you need it.  

One of the key considerations when deciding on which type of invoice finance is right for you is knowing how much control you want to keep. Once you know your answer to this question, you can get specific about the terms and conditions you’d prefer.

Here are common types of businesses that regularly utilise Invoice finance to grow:

  • Recruitment consultancies
  • Haulage companies
  • Couriers
  • Transport companies
  • Marketing agencies
  • Manufacturers
  • Contract cleaners
  • Export companies
  •  Printers

Is my business eligible for invoice finance?

If you answer “yes” to more than one of the questions below, it’s likely that invoice finance is a suitable option for raising finance for your business:

  •  Do you raise invoices?
  • Do you sell to other businesses (or the government)?
  • Is a lack of cash flow holding you back from growing your business
  • Do you wish to release cash currently tied up in unpaid invoices?

If this all sounds a little heavy, we can help you get to the right solution, just give us a call or request a quote. Our service comes at no extra cost to you and we’ll compare your options with multiple invoice finance lenders to ensure you get the best deal.

What are the benefits of applying with Fundaco?

At Fundaco we’re experts at taking the hassle out of a funding application. After just one phone with one of our team, your dedicated finance manager will use their expertise and experience to source the most suitable funding solution for your business and circumstances, often in as little as 24 – 48 hours.

Here are just a few of the benefits:

  • Exclusive offers for Fundaco customers from leading providers
  • Absolutely no charge to you for our services
  • Immediate comparative quotes
  • Impartial service
  • We only provide quotes from suitable providers that offer the best service
  • Speedy turnaround

Not sure what type of finance you need?