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BUSINESS GUIDES

Complete Guide: Invoice Financing

By Mike updated 27 MAY 24

If your business is struggling with cash flow & you have outstanding invoices from other businesses - Invoice Finance might be for you.

Funding can be essential to maintaining or growing your business however, finding the right type of funding is important. Invoice Finance is a flexible type of business funding that releases funds in unpaid invoices, before your customer has paid.

Getting paid quickly without chasing customers, sounds great right? Well it comes at a cost and you need to find the right finance partner. Depending on the deal, you will get a percentage of your unsettled invoice usually within 24 hours.

Each lender has different risk criteria's and the amount they are willing to lend differs. This guide arms you with the right information before we match you to a lender, to allow you to make the right decision for your business.

!

Quick know! You can only get finance against unpaid invoices from other businesses

Click here to get a call from a Invoice Finance expert

Types of Invoice Financing Deals

There are two main types of invoice finance - learn about the differences so you can find the right deal that suits your business.

Invoice Discounting

More suited for larger & established

businesses with longer tenure

Pay a fee plus discount charge when you use the money

You remain responsible to collect outstanding payment from customers

Your customers are not usually aware the invoice has been financed

Invoice Factoring

More suited for smaller

businesses with a short tenure

Get up to 90% of the invoice value - other fees/commission on top

The lender will become responsible for chasing your customer for payment

Your customer will become aware they are paying a different party

Speaking to an expert partner is always recommended as they are able to adapt fees, finance structures and more - they will be able to help find a deal that's right for you.

Benefits to My Business

There are some key benefits of invoice financing that can help you run your business, when compared to other forms of business finance, these include:

Flexibility & Rapid funding

Quick access to funds - could be within 24 hours, for when you need it most

Enhance Assets

Maximise your balance sheet by tapping into unpaid invoices

Focus on growth

Grow, scale or maintain your business with improved cash flow

Eligibility

Its first of all important to note that lenders have different lending criteria and risk appetites - that's why we ask you a couple of questions, in order to match you to the correct lender. Below are some of the key elements lenders will think about when looking at your eligibility for invoice finance:

Tenure the longer your business has been trading the better. You'll need to provide lenders with accurate trading history, which could include invoice schedules

Payment Terms the standard payment times are around 30-90 days. Its rare, but sometimes lenders will be less open to lending on invoices longer than this.

Customers Track Record sometimes lenders will want to see your customers credit rating and that they pay you back on time

B2B Invoices Only your customer must be another business and can't be a general consumer

!

Quick know! Even though there is no minimum for threshold to invoice finance borrowing, if you are looking to borrow over £1m then other finance solutions might be better suited for your business

The Process

Once you've decided to explore Invoice Finance as an option for your business, you may go through the following steps:

Step 1 Start a conversation with a finance partner by telling them a few details such as your invoice amount, details about your business (tenure, turnover & industry) - we can help match you to a lender

Step 2 The lender will then reach out to speak to you about your needs for finance and initially discuss options available - this is your chance to ask questions to make sure its the right thing for your business

Step 3 The lender might ask for a few more details such as your trading history, they might ask to see accounts or evidence of payment history from your client

Step 4 Your lender will provide you with a deal for finance which will include total cost, interest rate & payment terms. Once accepted, your finance could be paid out within 24 hours

Pros & Cons

Pros

Scalability

Accessing additional supports cash flow improvement, allowing you to invest in your business

Maximising Assets

Using unpaid invoices as collateral not only means you're safe guarding your other assets but also empowers you to capitalise an often overlooked asset

Enhanced Cash Flow
Being paid within usually 24 hours, coupled with the ability to scale alongside business growth, contributes to sustaining a robust cash flow through invoice finance.

Efficiency and Time Optimisation
Service providers usually assume the role of credit controllers, allowing your business to concentrate on growth without compromising time.

Equity Preservation
Invoice finance empowers your business to secure funds without the need of surrendering equity, offering a financing avenue that maintains ownership.

Scalability

Accessing additional supports cash flow improvement, allowing you to invest in your business

Maximising Assets

Using unpaid invoices as collateral not only means you're safe guarding your other assets but also empowers you to capitalise an often overlooked asset

Enhanced Cash Flow
Being paid within usually 24 hours, coupled with the ability to scale alongside business growth, contributes to sustaining a robust cash flow through invoice finance.

Efficiency and Time Optimisation
Service providers usually assume the role of credit controllers, allowing your business to concentrate on growth without compromising time.

Equity Preservation
Invoice finance empowers your business to secure funds without the need of surrendering equity, offering a financing avenue that maintains ownership.

Cons

Customer Reliance
You're relying on your customers to settle their invoice on time. If they don't, you'll be liable to pay the money back, even if you've not received it.

Immediate Expenditures
Engaging these services often entails payment of associated fees.

Privacy Considerations
Invoice factoring involves the lender reaching out to your clients for payment, this may impact their perception of your company. However, this concern does not arise with invoice discounting.

Long-Term Financial Implications
If you choose invoice factoring, consider the interest rates and processing fees imposed by lenders.

Credit Report Impact
When applying for finance, invoice finance providers conduct credit checks, potentially affecting your credit report.

Customer Reliance
You're relying on your customers to settle their invoice on time. If they don't, you'll be liable to pay the money back, even if you've not received it.

Immediate Expenditures
Engaging these services often entails payment of associated fees.

Privacy Considerations
Invoice factoring involves the lender reaching out to your clients for payment, this may impact their perception of your company. However, this concern does not arise with invoice discounting.

Long-Term Financial Implications
If you choose invoice factoring, consider the interest rates and processing fees imposed by lenders.

Credit Report Impact
When applying for finance, invoice finance providers conduct credit checks, potentially affecting your credit report.

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BUSINESS GUIDES

Complete Guide: Invoice Financing

By Mike updated 27 MAY 24

If your business is struggling with cash flow & you have outstanding invoices from other businesses - Invoice Finance might be for you.

ON THIS PAGE

Overview

Types of finance

Benefits to my business

Eligibility

The process

Pros and Cons

!

Quick know! You can only get finance against unpaid invoices from other businesses

Types of Invoice Financing Deals

There are two main types of invoice finance - learn about the differences so you can find the right deal that suits your business.

Pay a fee plus discount charge when you use the money

You remain responsible to collect outstanding payment from customers

Your customers are not usually aware the invoice has been financed

Get up to 90% of the invoice value - other fees/commission on top

The lender will become responsible for chasing your customer for payment

Your customer will become aware they are paying a different party

Speaking to an expert partner is always recommended as they are able to adapt fees, finance structures and more - they will be able to help find a deal that's right for you.

Benefits to My Business

There are some key benefits of invoice financing that can help you run your business, when compared to other forms of business finance, these include:

Flexibility & Rapid funding

Quick access to funds - could be within 24 hours, for when you need it most

Enhance Assets

Maximise your balance sheet by tapping into unpaid invoices

Focus on growth

Grow, scale or maintain your business with improved cash flow

Eligibility

Tenure the longer your business has been trading the better. You'll need to provide lenders with accurate trading history, which could include invoice schedules

Payment Terms the standard payment times are around 30-90 days. Its rare, but sometimes lenders will be less open to lending on invoices longer than this.

Customers Track Record sometimes lenders will want to see your customers credit rating and that they pay you back on time

B2B Invoices Only your customer must be another business and can't be a general consumer

!

Quick know! Even though there is no minimum for threshold to invoice finance borrowing, if you are looking to borrow over £1m then other finance solutions might be better suited for your business

The Process

Once you've decided to explore Invoice Finance as an option for your business, you may go through the following steps:

Step 1 Start a conversation with a finance partner by telling them a few details such as your invoice amount, details about your business (tenure, turnover & industry) - we can help match you to a lender

Step 2 The lender will then reach out to speak to you about your needs for finance and initially discuss options available - this is your chance to ask questions to make sure its the right thing for your business

Step 3 The lender might ask for a few more details such as your trading history, they might ask to see accounts or evidence of payment history from your client

Step 4 Your lender will provide you with a deal for finance which will include total cost, interest rate & payment terms. Once accepted, your finance could be paid out within 24 hours

Pros & Cons

Immediate ExpendituresEngaging these services often entails payment of associated fees.

Privacy ConsiderationsInvoice factoring involves the lender reaching out to your clients for payment, this may impact their perception of your company. However, this concern does not arise with invoice discounting.

Long-Term Financial ImplicationsIf you choose invoice factoring, consider the interest rates and processing fees imposed by lenders.

Credit Report ImpactWhen applying for finance, invoice finance providers conduct credit checks, potentially affecting your credit report.

Immediate ExpendituresEngaging these services often entails payment of associated fees.

Privacy ConsiderationsInvoice factoring involves the lender reaching out to your clients for payment, this may impact their perception of your company. However, this concern does not arise with invoice discounting.

Long-Term Financial ImplicationsIf you choose invoice factoring, consider the interest rates and processing fees imposed by lenders.

Credit Report ImpactWhen applying for finance, invoice finance providers conduct credit checks, potentially affecting your credit report.

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