In today's fast-paced business environment, timely cashflow is absolutely crucial for success. Late payments from customers can disrupt operations, hinder growth, and even put businesses at risk. Invoice Finance offers a powerful solution by providing businesses with immediate access to working capital based on their outstanding invoices. This means you can get paid upfront, rather than waiting for customers to make their payments, giving you the flexibility and financial resources to seize new opportunities, invest in growth, and manage unexpected challenges.
Understanding Invoice Finance
Invoice Finance is a collective term for various invoice-based lending options, including Invoice Factoring and Invoice Discounting. It allows businesses to receive funds upfront, rather than waiting for customers to pay their invoices. This can significantly improve cashflow and provide the flexibility needed to develop your business.
There are two primary types of Invoice Finance available to businesses:
Invoice Factoring is the most popular form of Invoice Finance in the UK. In this arrangement, we take on the responsibility for managing your credit control process, pursuing debtors for payment on your behalf. This allows you to draw up to 95% of the invoice value immediately, avoiding the typical 30, 60, or even 90 day wait for customer payments.
Invoice Discounting is similar to Invoice Factoring in that you can access working capital as soon as you raise an invoice. However, you retain full responsibility of your credit control process. Invoice Discounting is generally preferred by more established businesses with an existing credit control team.
Both Invoice Factoring and Invoice Discounting have several variants, including:
- Disclosed: Money is advanced to a company as it issues new invoices, and your customers are aware of the involvement of an Invoice Finance lender.
- Recourse: A financing arrangement that allows a business to sell their outstanding invoices to a finance company in exchange for immediate funds. The business retains responsibility for any unpaid invoices, which is why it's called Recourse Invoice Finance.
- CHOCs (Client Handles Own Collection): This falls between Factoring and Discounting, involving a disclosed Factoring agreement where your business maintains full responsibility for credit control rather than passing it us.
- Confidential: This allows you to access funds as usual while keeping the arrangement confidential from your customers.
LedgerLite is another option to consider for cashflow support. Similar to an overdraft, this facility enables businesses to draw funds throughout the month with minimal involvement. Due to the reduced amount of involvement from us, this solution is often preferred by well-established businesses who do not require daily support from their lender.
Need additional headroom?
Our Headroom Facilities provide extra breathing space during specific periods of your cashflow cycle, ensuring you have sufficient liquidity to achieve your business goals. When combined with your Invoice Finance facility, a Headroom Facility offers flexibility to access additional funds up to 10% of your facility value.
While your Invoice Finance facility offers security and reassurance regarding timely payments, a Headroom Facility provides the flexibility to negotiate unexpected or upfront costs.
Why Invoice Finance might be for you:
- Quick access to funds: Avoid waiting for customer payments.
- Improved cashflow: Receive money faster.
- Confidentiality: Choose to maintain privacy regarding the arrangement.
- Support for fluctuating businesses: Address challenging cashflow periods.
- Alternative funding: For businesses unable to secure traditional bank finance.
- Suitable for larger invoice values: Manage risks associated with late payments from fewer clients.
- Control with Invoice Discounting: Retain responsibility for chasing invoices.
- Wide range of industry applicability: Suitable for manufacturing, printing, recruitment, haulage, and more.
Things to consider:
Invoice Finance is a valuable external financing option for businesses. However, it's essential to evaluate all available options. Each business has unique needs, and your financing choices may vary. If you decide to pursue Invoice Finance, research the most suitable form for your business. Many lenders are happy to provide guidance on the best option for your specific circumstances.
Want to find out how Invoice Finance could help your business? Get in touch here.