Got cash tied up in invoices that could be used in your business?

Asset Funder can help you release that cash through Invoice Finance. Below, we have explained the different types of Invoice Finance and how it can benefit your business.

What is invoice finance?

Invoice finance is a finance facility which allows businesses to leverage their unpaid invoices, releasing cash into the business. If you are having cash flow issues due to unpaid invoices, this could be an ideal solution for you. Instead of waiting weeks or months for clients to pay their invoices, you could receive the cash within 24 hours, allowing you to free up money which can then be used to benefit your business in other ways.

How does invoice finance work?

There are several different types of invoice financing which we have explained below, however the process is usually as follows:

• You submit your outstanding invoices to your finance provider
• They will advance up to 90% of the value, usually within 24 hours
• When the customer settles the invoice, the finance provider will release the remainder to you, minus any service and interest fees.

What is the difference between invoice factoring and invoice discounting?

Invoice factoring – the funder takes ownership of the invoices, send you an advance on the money that is owed to you, takes care of credit control and can chase invoices with your clients for you. Because of this, your clients will know that you are using an invoice finance service. Invoice factoring is also known as factoring of debts. Invoice factoring is often favoured by smaller businesses as a lot of the work is taken over by the finance provider.

Invoice discounting – this is effectively the same process as invoice factoring in that the provider will still lend against your unpaid invoices, however you retain the credit control. As less work is involved on the lender’s side with an invoice discounting facility, the fees may be reduced. It also means that the service can be confidential, meaning your clients won’t be contacted by the finance provider and do not need to know you are accessing the facility. This is often favoured by larger businesses.

There is also the option of selective invoice finance. You may find that you have some clients who always pay invoices right away, and others that can take weeks or months. Selective invoice finance allows you to choose which invoices you wish to borrow against. You can even access invoice financing as a one-off or every now and then, which is known as single invoice financing or ‘spot factoring’.

What are the benefits of invoice finance?

As you can see, invoice finance is a flexible funding solution which can improve your cash flow and gives you access to the capital you need to meet your commitments and grow your business. Benefits of this funding solution include:

• You won’t have to wait weeks or months for invoices to be paid, you can access the cash within 24 hours after raising the invoice.
• Certainty of payment means you can invest confidently in growing your business.
• Improved cash flow will mitigate the risk of meeting unexpected costs when they arise.
• Clear pricing, no hidden charges.

What are the costs of invoice financing?

There are typically two types of costs with invoice funding. These including the discount fee (also known as discount rate or factor rate) which is essentially the interest rate paid on the money advanced. Then there is the service fee, which is the cost of running your facility. The fees will vary based on the invoice finance provider; however Asset Funder can work with you to ensure you are getting the best rate.

Who is eligible for invoice financing?

Invoice financing could be suitable for companies within all sectors, however there are some factors that lenders will take into consideration including business size, trading history, size and frequency of invoices, and the credit-worthiness of your customers. Lenders need to feel confident that the invoices are going to be paid and therefore will need to see a summary of a sales ledger to show past payments. If you are unsure whether your business is eligible for invoice financing, please get in touch and a member of our team would be happy to advise you further.

Why Asset Funder?

Our team are highly experienced in helping customers access a range of finance products. We have strong relationships with a range of invoice finance providers which means we can provide a fast turn around so that you can receive funds within a matter of days. Our expertise in financing solutions means that we can advise you of the best option for your business needs. You can find out more by calling us on 0800 999 69 62 or emailing us.