Guide to invoice financing
All businesses experience cash flow problems at one time or another. With invoice finance you can unlock the money tied up in your sales ledger, giving you quick access to funds as well as more time to get on with running your business.
 
Invoice finance provides an ideal funding solution for any small to medium-sized business that is experiencing cash flow difficulties. It allows you to free up the funds in unpaid invoices and keep your business moving along in the right direction.
 
Over 42,000 companies in the UK use invoice finance to help develop and sustain their businesses. Any business that raises invoices and gives its clients credit terms can access this type of lending.
 
Invoice finance can be used for many of your funding needs, including:
  • Starting a new business
  • Managing cash flow difficulties
  • Growing your business
  • Purchasing of new equipment
  • Moving to new premises
  • Management buy-outs or buy-ins
  • Acquiring other companies.
For real life examples of invoice financing successes, read this guide from Business Money and RSM Tenon and find out how 42,000 businesses used invoice financing to finance £212 billion of sales.
 

Advantages of invoice finance

  • Invoice finance is flexible. There are no rigid restrictions with funding levels as the amount borrowed grows in line with your business and its increasing turnover.

  • Funding is based on current business performance and not historical financial information. This makes it a suitable funding option for start-up companies with no previous financial history.

  • The funding can be secured on business assets with limited or no personal security required.

  • Invoice finance does not interfere with your work. You produce your goods and services as normal then issue an invoice to your client. The details are then passed to your invoice finance company who will notify you of the funds that will be available.

  • You can access up to 90% of the gross invoice value available to your business within 24 hours of the invoice being raised.

  • When your client pays the invoice, the remaining percentage of the invoice value is made available to you, minus the costs of the invoice finance service.

  • Your invoice finance company can carry out a complete credit control service for you including chasing customers, sending statements and collecting payments.

  • Some services offer confidentiality so that your customers are not aware that an invoice finance company is involved.

  • You can be protected against bad debt that might otherwise have to be written off at an expense to your company.

  • The facility can be open ended with no annual renewal required.

Which form of invoice finance is best for me?

There are two forms of invoice finance: factoring and invoice discounting.
 
Factoring
Factoring is a type of funding that is flexible and grows with your business. It is ideal for businesses that require assistance with sales ledger administration and a full credit control service.
 
Other features can include up to 90% of approved debts, a fully disclosed facility, and protection against bad debt. This solution is most suitable for businesses without an existing accounting function.
 
Invoice discounting
If you already have an adequate credit control service and sales ledger administration then invoice discounting can offer your business up to 90% of approved debts, bad debt protection plus a confidential facility.