What Is Invoice Finance?
No matter what type of business you own or work in, there will always be companies striving to outperform you or trying to offer a more competitive edge, enticing your clients to switch suppliers. Having a competitive edge really is a necessity, especially today in an ever-changing business landscape.
Often a business is asked to operate by selling their products or their services to a customer on credit terms, where payment will be in 30, 60 and occasionally 90 days after product shipment or project completion. Whilst this is an ideal solution for your clients, it can often be detrimental to the business, having a huge impact on cashflow and having the ability to meet day-to-day costs. This is where the benefits of invoice finance really come into their own. In essence it provides you with the necessary cash that you need in your business as soon as you issue your invoices.
Key facts about invoice finance:
- In the main Invoice finance is delivered through 2 products. The first is Factoring which is a disclosed service with the customer base being fully aware of the service. The second is Invoice Discounting, which is predominantly a confidential facility without the customer base being aware.
- In essence, with Factoring, the Invoice Financier looks after a company’s unpaid invoices, whereas with Invoice Discounting the responsibility of the sales ledger management is retained by the business.
- You get immediate access to cash as soon as an invoice is raised.
- When a customer pays your invoice, you will receive the balance of the face value of the invoice, minus the lender’s fee.
Key advantages of using invoice finance are:
- You can improve your cashflow and working capital without having to wait for your customers to pay your invoices promptly.
- Immediate access to funds means you can run your business by paying suppliers on time, fulfilling payroll obligations, purchasing new equipment or facilitating further expansion.
- There is no need to offer property assets as a form of security.
- Packages can be tailored to individual business needs.
- Often an approval process is relatively painless and quick, on occasion they can be approved within 48-hours.
Typical examples of where invoice finance is required are:
- Recruitment companies providing temporary staff. Often employees are contracted on a weekly basis, so wages need to be paid every 7-days. However often a client agreement states payment terms of 30 days + so an Invoice Finance facility would accommodate this type of cashflow cycle.
- Food and drink manufacturers who supply some of the leading chains of Supermarkets have to pay their suppliers on 30-60- day terms, whilst waiting up to 90-days for payment from their customers.
- Young businesses who are going through a quick and unexpected growth period due to business success will often feel the pinch. Cashflow needs increase quickly to accommodate for the business expansion and invoice finance is often key to maintain and healthy and stable platform for success.
We regularly get asked by businesses already using invoice finance if we can assist them, this may be due to issues with their current provider or indeed that their funding has been restricted. Here at Invoice Finance Connect, we are always happy to offer impartial and independent advice to ascertain if we can assist you.
If you have a question or need some help in relation to Invoice Finance, then our team will be delighted to help. For a free consultation please call us on 01635 283089.
