Invoice Financing

Types of Invoice Finance:

There are two main kinds of Invoice finance and they are: 

1. Invoice Factoring: In an invoice factoring, a business sells its assets (invoice) to a 3rd party (called a factor) at a discount. 
2. Invoice Discounting: It is the practice implemented for employing a company’s due accounts received as collateral for a loan purpose.

Requirements & Eligibility:

Some basic requirements for invoice finance are as following: 

• Your business trades with other businesses (not consumers) 
• You are a Ltd. company or LLP.
• You offer industry standard credit terms 
• Few of the  lenders have a minimum invoice per month sent per month requirement
• A particular Minimum turnover 

How Does Invoice Finance Work?

1. You continue your business as was common and invoice your clients/customers 
2. You then pass the invoice details to the agreed provider of invoice finance. 
3. The provider pays you an agreed percentage (this varies per company), often within only 48 hours. 
4. Depending on the agreement, you’ll chase the payment as was common if that’s necessary, or the provider will do this for you. 
5. You receive the rest of the invoice amount once the invoice is paid, minus any agreed service fees.

Benefits of Invoice Finance

• It’s more flexible than overdrafts or business loans. 
• Decisions to lend against invoices may often be done quicker. 
• The funding grows in-line with the company’s turnover. 
• Normally, you get a higher level of borrowing against the assets. 
• Can help to scale back the risks of late payments or defaulted invoices