What is Invoice Finance?
The working capital products known as Invoice Finance can be used to raise cash against the assets tied up in the outstanding sales ledger (also called the accounts receivable). These sales invoices are often the most valuable asset but also an asset that is overlooked when it comes to raising finance. Invoice Finance seeks to address this by providing revolving finance against the outstanding sales ledger of the business.
Immediately the invoices are raised, the invoice financier will provide an initial payment (or early payment) against the gross value of the outstanding sales ledger and thereafter, the invoice financier will provide an early payment against subsequent approved invoices as they are raised. This is how invoice finance can improve the cash flow of the business.
Types of Invoice Finance
There are two principle types of invoice finance, factoring and invoice discounting.
With factoring, the invoice financier (called a factor) will:
- Provide finance against the sales invoices, including overpayments in some cases.
- Provide sales ledger management by running a sales ledger for the client and posting new invoices and cash to that sales ledger.
- Provide a sales ledger collection service whereby the factor will send out statements, chasing (also known as dunning) letters to clients and making telephone calls to debtors to chase in the outstanding invoices.
With invoice discounting, the invoice financier (known as a discounter) will:
- Provide the invoice finance against the sales invoices only.
This leaves the client to run their own sales ledger and to collect in the outstanding sales invoices. In some cases an invoice discounting facility can be confidential ( Confidential Invoice Discounting) so that the debtors do not even know of the invoice discounter's involvement or it can be disclosed ( Disclosed Invoice Discounting).
How Much Cash Could You Raise?
To find out how much cash you could raise using invoice finance use our free online cash calculator.
What Will It Cost?
Read an explanation of the costs.
For a quotation based on your individual circumstances:
Complete an: ONLINE QUOTATION SEARCH REQUEST or call us and speak to an adviser in confidence on 01892 784183.
Further Invoice Finance Resources
