Invoice Finance FAQs

What is Invoice Finance?


Invoice Finance enables businesses like yours to sell their unpaid invoices to an Invoice Financier. The Invoice Financier will then advance you a substantial portion of the value of the invoice. This means you can access your funds without having to wait 30 or 60 days for customers to pay and can reinvest the funds without delay. The Invoice Financier will pay you the remainder of the invoice amount (minus their fees) when the customer has settled the invoice in full.

 

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What percentage of the invoice will I be advanced?

Typically an Invoice Financier will advance 80 – 90% of the value of an invoice. This will vary from provider to provider. However, in some sectors, a financier could advance as much as 100% of the invoice.

How long will it take for me to receive the advance?

One of the best things about Invoice Finance is the speed at which you will have access to your funds. This will vary depending on which provider you work with but on average you should receive your funds within 24 – 48 hours of submitting your invoice.

Is it right for my business?

Whether you’re just starting up, you’re a self-employed professional or you’re running an established business of any size, there will be an Invoice Finance arrangement to suit you. Generally speaking, Invoice Financing is best suited to B2B businesses which are raising invoices to other UK companies for either a service or product.

While it’s an ideal solution for businesses struggling with cash flow, even the most profitable businesses can benefit from injections of cash from time to time in order to meet immediate obligations. For example, when businesses need to spend money on supplies or services before payment, a cash advance is a perfect way to avoid unnecessary strain on the budget.

Do I need a good credit history to be eligible?

A lengthy credit history is not necessarily required for Invoice Finance. While banks or other lenders may make decisions in this way the majority of Invoice Finance providers are far more interested in your current sales ledger, your customer relationships and the propensity of your customers to pay their debts.

How much money could I release with Invoice Finance?

This will depend on the value of your invoices, but generally providers can advance sums from a few thousand up to millions! Whatever the value, you will be able to access between 80 – 90% of it within 24 – 48 hours. You’ll receive the remaining 10 – 20% (minus the provider’s fees) once your customer has settled the invoice in full.

What are the different forms of Invoice Finance?

Simply put, Invoice Finance is a general ‘umbrella term’ for Invoice Factoring and Invoice Discounting. But what do they mean?

In both scenarios, the Invoice Financier will advance you a percentage of your invoice amount with the remainder paid (minus their fees) once the customer has paid. The difference is in the method used to collect the customer’s payment:

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Invoice Factoring: The finance provider will act as your credit control department and manage your sales ledger on your behalf. You are essentially outsourcing this element of your business as they will be communicating with your customers for you.

Invoice Discounting: You retain responsibility for securing customer payments and managing your relationships.

You may also see the acronym CHOCS used. This stands for Client Handles Own Collections.

Will Invoice Finance affect my customer relationships?

If you choose an Invoice Factoring service, your provider will become responsible for communicating with and securing payments from your customers. While this may seem a risk to some, the reality is that this is what the provider specialises in. The best providers will view their service as a partnership; if you don’t get paid, they don’t get paid. Similarly, if your business’ reputation were to be damaged, they suffer the consequences too.  The result is a professional and effective service.

Alternatively, you could opt for Invoice Discounting which means you retain control of your customer relationships at all points in the process.

Confidentiality is also an option with many arrangements so your customers need never know a third party is involved.

Is Invoice Finance a better option than bank funding?

Unlike a bank loan, Invoice Finance will not show as a liability on your books and will grow in line with your turnover. You won’t be asked to justify what you intend to spend the funds on and you will receive your money far quicker than you would if a bank were involved. There is also a lower level of risk involved as the funds have been secured against work already completed.

Is there a maximum invoice amount that I can factor?

Generally, there are no upper limits with many Invoice Financiers dealing in the tens of millions but each provider will set their own terms.

What fees should I expect?

Fees will vary from provider to provider and it’s important to check all the small print in any contract you enter into. There are usually set-up fees in the beginning, transaction fees and the provider’s percentage fee for the service.

What happens if my customer doesn’t pay their invoice?

Many providers will offer non-recourse arrangements with Bad Debt Protection. This means that if your customer fails to pay their invoice you won’t be asked to pay the advanced funds back. This may not be offered to startups or small businesses because of the risk to the provider. With recourse arrangements you will need to repay the money you were advanced in the event a customer doesn’t pay.

If you’d like to get free quotes from invoice finance providers we can help. Complete the form below and we’ll call you back to discuss your business requirements within 1 working day.















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