What is Invoice Finance?

A facility for invoice financing gives lenders the opportunity to lend funds directly to businesses to let them leverage their unpaid invoices and receive instant cash. Once the customer pays the invoice, the lender will release the final amount less any fees for the service.

There are two types of invoice finance:

  • Invoice Factoring: Working capital is provided to businesses whose invoices have longer payment terms.
  • Invoice Discounting: Unpaid invoices (accounts receivable) are sold by businesses to a third party.

Advantages of invoice finance:

  • Improved cash flow
  • The ability to extend payment terms with confidence
  • Funding is available quickly
  • Most businesses meet the qualification requirements

FAQ

Do I need a good credit history to get Invoice Finance?

To be eligible for Invoice Finance, you don't need a long credit history. This is in contrast to the normal requirements of many other sources of external finance, such as bank loans and business overdrafts, which tend to focus on perceived value in the Balance Sheet or insist on taking charges over the marital residence to give a facility.

Is Invoice Financing a good idea?

Because of the advantages it provides, invoice financing is a terrific alternative for many organisations. It can also be customised to meet the specific demands of different enterprises. However, there is no such thing as a one-size-fits-all answer when it comes to any type of business financing. As a result, you should always look into the possibilities accessible to your company to guarantee you have the best possible facility.

Are there any disadvantages of invoice finance?

Invoice finance, like all financial products, is not a one-size-fits-all solution:

  • It's better suited to specific industries.
  • Only for those that trade B2B and on credit conditions.
  • Customers' creditworthiness is a key factor (but it can also be an advantage!).