Invoice Finance
Invoice Finance offers a flexible financing solution for B2B SMEs to improve cash flow by unlocking the value of unpaid invoices. It's particularly effective for businesses that experience delays in payment, allowing access to funds often within 24 hours of invoicing.
Discover your funding options
Check your eligibility for invoice finance with our online form without affecting your credit score.
*Invoice finance terms are highly specific to each deal, factoring in aspects like factoring vs discounting and the inclusion of bad debt protection. Therefore, exact fees can vary. A key advantage is the ability for businesses to access up to 90% of their invoice value in as little as 24 hours. This example is for illustrative purposes only. All finance and quotes are subject to status and income. Click here to check your eligibility to receive options tailored to your circumstances.
How It Works
The process involves a finance company purchasing the debt owed to your business. They advance a substantial percentage (up to 90%) of the invoice value, often within 24 hours after invoicing. Once your client pays, you receive the remaining balance, minus the lender’s fees. This rapid access to funds makes invoice finance an appealing option for managing cash flow.
Types of Invoice Financing
Businesses can choose from: 1) Invoice Factoring: The lender manages credit control. 2) Invoice Discounting: You retain control over your ledgers. 3) Selective Invoice Finance: Specific invoices or customer accounts can be chosen for financing.
Eligibility and Criteria
Lenders typically consider your trading history, the quality of your debtors, and your invoicing process. Businesses should ideally have a history of issuing invoices with payment terms of 30 to 90 days.
Advantages and Challenges
Invoice finance offers quick access to funds, scalability with business growth, and can save time in credit control. It's contingent on customer reliability and may impact client relationships in some factoring arrangements.
Interest Rates and Fees
The costs vary depending on the invoice value and the agreement terms, including service fees and interest on advanced funds. Due to the deal-specific nature of invoice finance, costs can be highly variable.
Utilisation
Funds can be used to enhance cash flow, invest in growth, or cover expenses such as payroll and inventory.
Combining with Trade Finance
For businesses dealing with cash flow challenges at both ends of the sales cycle, combining invoice finance with trade finance ensures smoother financial operations.
Frequently asked questions
What is invoice finance?
Invoice finance is a way for businesses to release cash tied up in unpaid invoices. It provides access to a percentage of an invoice’s value soon after the invoice is issued to a client, often within 24 hours.
Who can use invoice finance?
Ideal for B2B businesses in the UK with a solid trading history and invoicing process. Particularly beneficial for companies experiencing cash flow gaps due to delayed invoice payments.
What is the typical advance rate for invoice finance?
Lenders usually offer up to 90% of the invoice value upfront. The remaining balance, minus any fees, is released once the customer pays the invoice.
What are the main types of invoice finance?
The two primary types are:
- Invoice Factoring: The lender manages your sales ledger and collects payments from your clients.
- Invoice Discounting: You maintain control of your sales ledger and customer relationships.
How quickly can I access funds through invoice finance?
Funds are typically available within 24 to 48 hours after issuing the invoice and establishing the finance agreement.
What are the fees associated with invoice finance?
Fees vary widely and are deal-specific. They usually include a service fee (based on your turnover) and a discount fee (akin to interest on the advanced amount).
Is invoice finance suitable for all businesses?
Most suitable for businesses with robust invoicing processes and reliable customers known for timely payments.
Do my customers need to know I’m using invoice finance?
In Invoice Factoring, customers are generally aware as the lender handles payment collection. In Invoice Discounting, the arrangement can remain confidential.
What documents are needed to apply for an unsecured business loan?
Typically required are financial statements, details of your accounts receivable ledger, and customer information.
Can I finance a single invoice?
Yes, selective invoice finance or spot factoring options are available for financing specific invoices.
Get invoice finance
Limited companies can receive a loan decision without impacting their credit score. This allows you to evaluate your options without worry.
