Traditionally, businesses facing financial unbalance or better yet looking for further sources of finance to expand will turn to banks; seeking out loans or extended overdrafts.
But from the array of financial options available in the current climate of rigourous lending practices, Invoice Finance stands among the fray; focusing on stabilising the flow of cash within businesses and enhancing business growth.
So, as a growing financial solution of a different kind, your business, through this, may have a more flexible and predictable access to capital by using your invoice/sales book debt as principal security to guarantee funds.
Drawn from daunted prospects
As a breath of fresh air to firms that find that they have tight working capital, invoice finance – whether it is in the form of factoring or invoice discounting – provides immediate access to cash already earned.
The mechanics of the facilities work as such that upon creating an invoice(s) and sending them to your debtor(s) for payment, copies are also sent to your lender for the verification of the value of debt and work completed. Following this, an advanced amount would be released to you – which can be anywhere up to 95%.
Once full payment is collected by the lender in the case of factoring or by you under invoice discounting, all outstanding money owed would be returned to you, minus all fees charged by your lender.
Whilst there are several forms of factoring and invoice discounting, the broad operational principles notes above are true of each product.
The charged amount
The costs of invoice finance are little more than that of an overdraft but on average deliver two times more cashflow than an overdraft for clients with tangible security, and four times more cashflow for clients without. There are generally two costs associated with invoice finance, a service fee (generally a % of turnover) and a factoring fee (interest cost on the amount borrowed).
An array of lenders providing this service:
High Street: Lloyd’s, HSBC, Santander, RBS
Independents: Bibby, Venture Capital, Leumi, Close and SME Invoice Finance
Read more about invoice finance here….