Invoice finance, also referred to as an invoice loan or invoice funding, is a flexible business loan that allows you to access cash that is owed to you in unpaid invoices, helping to speed up your payment cycle.
Rather than waiting 30, 60, or 90 days for your customers to pay, you can receive a percentage of the invoice upfront. This enables you to bridge the gap between invoicing and payment, ensuring a healthy cashflow for your business.
With invoice finance, the process is simple:
This streamlined process ensures that you have immediate access to the funds tied up in your outstanding invoices, allowing you to cover expenses, invest in growth opportunities and maintain a healthy cashflow.
There are 3 main types of invoice funding, these are: invoice factoring, invoice discounting and selective invoice discounting. Which is right for your business will depend on your specific need.
With invoice factoring, as well as receiving funding, you will also be outsourcing your credit control and collections to the invoice finance provider. This allows you to focus on your core business while leaving the administrative burden of chasing payments to the experts.
Invoice discounting, on the other hand, allows you to retain control over your credit control. You continue to manage customer relationships and collections while enjoying the benefits of improved cashflow.
Unlike invoice factoring or invoice discounting, selective invoice finance gives businesses the flexibility to choose to release cash from only some invoices. This can be particularly useful when businesses have a few large invoices, or specific customers with longer payment terms.
Instant access to cash tied up in unpaid invoices ensures a good cashflow for your business, enabling you to meet your expenses and invest in growth opportunities.
Unlike other business loans, invoice finance grows with your business. The funding available to you increases as your sales and invoice volume rise, allowing for scalability.
With invoice finance, you can redirect your valuable time and resources away from chasing payments and towards other business activities.
You can reduce the risk of late payments and bad debt by choosing invoice factoring. The expertise of the invoice finance provider in credit control ensures your invoices are paid on time.
Invoice finance providers will have their own varying criteria, but typically your business will need:
Businesses of all sectors will be eligible for invoice finance if they raise invoices to their customers. There are some invoice finance providers that specialise in specific sectors, such as invoice finance for recruitment companies.
It’s useful to bear in mind that unlike other types of business finance, invoice finance is based on your customers' creditworthiness, rather than your business's credit history. This makes it accessible to businesses with bad credit.
If you sell goods or services on credit to other creditworthy businesses and your invoices are for fully-delivered goods and/or services, you meet the basic criteria. With invoice finance, your future growth is more important than an extensive credit history.
Yes, accounts receivable and invoice financing are the same thing. Accounts receivable specifically refers to invoice finance when you retain control of your debtor book, also known as invoice discounting, vs invoice factoring where the invoice finance provider takes responsibility for credit control.
There are a number of different invoice finance providers, some of the providers we work with are Lloyds Invoice Financing, Bibby, Aldermore and Close Brothers.
Which invoice finance provider is right for your business will depend on a number of factors, speak to our Funding Specialists to find the right option for your business.
With invoice finance there is a risk of over reliance on your customers. If your customer fails to make a payment, you may still be responsible for repaying the advanced funds.
You will also have to pay short term costs such as initial fees from the invoice finance provider.
A key benefit of invoice finance is that it improves a business’ cashflow by providing immediate access to working capital. It promotes a business’ stability by eliminating the uncertainty of late payments and provides flexibility as the facility grows with the business as funding increases along with turnover.
No, you can have cash advanced to you for all your invoices or only for ones from select customers. Invoice finance allows you to maintain control over your collections and relationships with your customers.
Some lenders finance one-off invoices on an as-needed basis. This is called spot factoring and we work with lenders who provide this type of finance. Since there is no minimum requirement, we encourage you to make ongoing, regular use of invoice finance to keep it active. You can terminate the agreement at any time and there are no penalities.
Yes. It is possible to get a new lender in place to lend as soon as the contract is open.
Invoice finance is viewed as a normal, progressive business practice for growth-oriented companies. In fact, it is one of the fastest growing types of funding, used by more than 40,000 companies in the UK in a given year, according to the British Insurance Brokers' Association.