Posted: 20 / 06 / 2023

Article by: Leyton Jeffs, Group Chief Revenue Officer

 

Invoice Finance is a fantastic working capital solution for businesses that need to pay for supplies or staff costs, before being paid by their customers. Because owners are able to access the cash tied up in invoices earlier, it means they can grow their business at a much faster rate and complete any plans without delay.

If you trade B2B and have unpaid invoices, Invoice Finance could be the solution for you…

What is Invoice Finance?

Invoice Finance is a funding solution that uses your outstanding invoices as security to provide a facility; it’s similar to the way a mortgage uses a property.

A lender will advance a percentage (typically up to 90%) of your outstanding invoices on a rolling basis, and much like an overdraft, availability is created, and you can decide how much or little you borrow.

There are a number of different products under the umbrella term “Invoice Finance”, and whilst they all do a similar thing, each has it’s own nuances.

Popular Invoice Finance Solutions 

  • Selective Invoice Finance: Where you decide which invoices to finance and which not to  
  • Factoring: Where the provider not only lends you money but carries out the credit control function for you
  • Confidential Invoice Discounting: Your customers don’t know about the facility as the lender has no contact with debtors
  • Asset-based Lending: A facility that not only uses debtors, but also inventory and fixed assets to create a bigger pot of funding

What is Invoice Finance used for?

The facility is typically used for funding the working capital cycle (paying suppliers and staff before you’re paid by customers) but can be used for a wide variety of different things.

I’ve seen the funds used to fund MBOs, negotiate supplier discounts for early payment, stock purchases, deposits on starting a property portfolio – there actually isn’t much I’ve not seen this product used for!

If you’d like to know more about this popular funding option, drop me an email and we can arrange for a no-obligation chat about the pros and cons of each type of facility. You can reach me on 07894 507425.