Invoice finance is a generic term for raising finance against the value of unpaid invoices, which in turn can help to accelerate cash flow and give an on-going supply of cash linked to sales. There are typically 3 products:-
1. Factoring
2. Invoice Discounting
3. Spot/Selective Factoring
Factoring
Factoring is a process whereby the lender will
1. Acquire your invoices, as and when you raise them;
2. Release an immediate payment to you (typically up to 90%) of the gross invoice value;
3. Liaise with your customers and collect in (or chase up!) payments when due;
4. Upon the customer paying the invoice, the balance of funds will be released to you, less the factoring charges.
This is an extremely useful product for owner-managed businesses who may not have the resources or time available to chase up customer payments.
Invoice Discounting
Invoice discounting is a facility which involves-
Invoice discounting follows the same traits as Factoring apart from the fact that this is more often than not a Confidential facility so the customer does not have any knowledge of the financing arrangement.
This product is more suitable to larger businesses, typically turning over >£0.5m per annum, who have good accounting and credit control systems
Spot Factoring
This product generates cash in the same way as Factoring or Invoice Discounting but just involves a business raising finance against a specific invoice as opposed to the whole ledger.
Suitable for businesses that only have the odd customer on longer payment terms or a concentrated customer.
Bad Debt Protection can be arranged with any of these products to provide businesses with peace of mind should a customer get into financial difficulties and be unable to pay an invoice.
In addition to these product types, we also have access to a bespoke lender who provides a working capital facility that sits between a conventional overdraft facility and invoice finance. Please enquire for more details.