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How Can Invoice Finance Help My Business?
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How Can Invoice Finance Help My Business?

Invoice financing allows businesses to manage their cash flow by leveraging their unpaid invoices and releasing money back into the business. But is it the right decision for you?


How does Invoice Finance work?

Invoice finance is where you sell your unpaid invoices to a finance provider. They will then give you a cash advance, usually up to 80% or 90% of the total amount. Once the customer pays their invoice, you receive the remaining balance, minus the service and interest fees for lending you the money. 

What are the benefits of Invoice Finance?

  • Improve cash flow, allowing you to reinvest this money back into your business sooner.
  • Access money within 24 hours rather than waiting weeks or months for invoices to be paid.
  • Flexibility of managing your own credit control, or letting your finance provider take over this role, freeing up more time for you.


What is the difference between invoice factoring and invoice discounting?

Invoice factoring – you sell your unpaid invoices to a lender who will provide you with a cash advance, they will then manage the credit control and will chase the clients for you. This means that your clients will know you are using an invoice finance facility. 

Invoice discounting – the lender will still provide you with an advance against your unpaid invoices, however you will retain the credit control and chase your own clients to pay their invoices. This means the service can be confidential and your clients don't need to know. 

For a more in-depth explanation, please visit our product page here

Which option is best, invoice factoring or invoice discounting?

Well, that depends on the needs and turnover of your business. There are a few things you should consider.


1. Think about whether you are okay with your customers knowing that you are accessing an invoice finance facility. If you choose invoice factoring, they will know. This is because they would be contacted by the finance provider to pay their invoices. If you opt for invoice discounting, your customers do not need to know.

2. Decide whether you want to be the one who is in charge of credit control and chasing invoices. This may be suitable for a large company who has the staff to keep up with this, but if you require extra help then invoice factoring could take over this role for you.

3. Consider the suitability and eligibility of your business. Many finance providers will only consider businesses with a sales volume higher than £250,000 per year for invoice factoring. With invoice discounting, this is usually only offered to larger businesses with sales over £1 million per year.


If you are a smaller business, fear not. There are still finance providers who may offer you an invoice finance facility with sales far less than that. For example, there are even selective invoice facilities where you can choose which invoices you want to borrow against, and some providers will even consider single invoice financing.


Invoice Finance under the Recovery Loan Scheme

It is worth noting that the government have created the Recovery Loan Scheme to help businesses bounce back after the pandemic. This is running until 31st December 2021, subject to extension. Under this scheme, you can receive invoice finance, as well as asset finance, loans, and overdraft facilities.

With RLS, you can access invoice finance from £1,000 to £10 million per business. This makes it suitable for all business sizes. Please note that many finance providers have applied for RLS accreditation and they will all have slightly different terms. If you would like to know the best option for you, our team of experts can help you choose.

To find out more about the RLS, please visit our product page here.


How to apply for Invoice Finance

If you are interested in accessing invoice finance to improve your cash flow and reinvest in your business, please get in touch with our team and we’d be happy to assist you. 



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