The invoice finance market is a diverse and competitive place. With over 80 funders providing invoice finance it can be very confusing and time consuming to find the right one which meets your needs. Engaging an expert can ensure you have a much greater chance of getting that right fit for you.
So what is invoice finance?
Invoice finance is a flexible form of funding, which releases cash tied up in outstanding customer invoices
There are 2 main types of invoice finance
- Provides up to 90% cash injection into business
- Full credit control and sales ledger management
- Relevant, timely letters and statements to customers
- Disclosed or confidential credit control function
- Allocation of customer payments
Different to factoring in that the client retains control of their sales ledger management and credit control activity.
- Client receives up to 90% advance of invoice value
- Freedom for business to retain control of their sales ledger
- Invoices financed can be domestic or export sales
- Typically a confidential facility or can be disclosed where the funder requires greater visibility
Invoice Discounting is more often offered to clients with the following business characteristics:
- Growing, profitable companies
- Good internal systems and controls
- Own Credit Control operation
- Well maintained Sales Ledger
- Good debt turn in relation to the industry
- Accurate and timely management accounts
Specialist Sector Finance
Provides funding as with factoring but also an outsourced payroll function assisting clients in the recruitment sector.
Construction Finance offers cash advances against outstanding billing allowing you to access money earlier, rather than waiting for customer payment. Funding can be generated against uncertified applications for payment or interim invoices and is often provided with a confidential credit control and sales ledger management service enabling the client to maintain their existing customer relationships.
From time to time a business may not need to fund all of their invoices and may only need funding intermittently especially when they have large orders to deliver, a big bill to pay or seasonal cash requirements. A recent development in the invoice finance industry has been the upsurge of 'spot' or single invoice finance providers.
This can often be provided in a quick and efficient manner without the need for in-depth due diligence as the funders are focused on just one invoice and assessing the collectability of that alone.
Funding is charged daily for the length of time the funding is outstanding. This can be seen both as cost effective (if funding is only required on a short term and intermittent basis) or costly if it used more regularly (where a more structured invoice finance facility may be better suited).
It is vital that you consider all options before you choose which invoice finance facility suits your circumstances best.