Unlock the potential in your invoices and get the money paid to you sooner.
Invoice finance is used to free up working capital. It works by allowing you to draw against invoices that have been raised to your client (must be another business).
When used correctly it can have it can have a significant impact on shortening your working capital cycle and freeing up cash for you to grow your business.
When you provide credit terms to your client, you are effectively loaning the client money for the term you’ve agreed. This means that not only have you not got the goods but you also don’t have the money that generating that sale would generate and you would have to wait for the agreed term before being able to reinvest ad buy new stock. When using invoice finance, you raise the invoice with your client submit that invoice to the lender.
They will then allow you to draw a pre agreed amount against that invoice. You’re client then pays the invoice, the balance you have borrowed is settled, less any costs and the remaining balance given back to you.
There are two main types of invoice finance:
Factoring – This is a fully serviced offering where the lender will fund the invoices and collect the debt on your behalf. With this facility your clients will now that you are using an invoice finance provider (known as a disclosed facility).
Invoice Discounting – This is typically designed for more established businesses who have their own finance team/person. The lender will fund the invoices; however, the borrower is responsible for debt collection and reporting to the lender on outstanding balances etc. Usually the borrower’s client do not know that this facility is in the background (known as a confidential facility)
Invoice Finance FAQ's
How long can I borrow for?
The borrowing requirement will be determined by the transaction that is being funding, however as this is a revolving credit the overall facility can stay in place as long as is needed.
Will I need to give security?
Yes, the invoices act as the main security however depending on the financial strength of your business, the quality of your clients, how many you have etc you may be required to give some sort of personal guarantee. Check out our blog on what types of security can be used in borrowing.
How much can I borrow?
This will be determined by you debtor book (the clients that owe you money). Invoice finance works by lending you an agreed percentage of the outstanding invoices with a pre agreed ‘funds in use’ limit. This will be the maximum you can borrow and is usually set higher than you initially need.
Why work with us?
With the multitude of offering across lender ranging from the high street to boutique lenders, the choice can be mindboggling. We have a whole of market view but have created a panel of trusted funders with enough variety to be able to support all enquiries. We also review your facilities with you at pre agreed intervals to make sure they are working the way they should and also to make sure you are still receiving the most competitive funding.
If you are already using invoice finance for your business, then get in touch as we’ve been able to make significant saving for clients previously.