Why wait up to 90 days to get your invoices paid from customers? Invoice Financing means you get paid quicker
Release money immediately from outstanding invoices to fund your business.
Many businesses suffer because of late payments from customers and clients, causing cash flow problems. But there is no need to wait 90 days or longer to get your invoices paid. Invoice financing means you can release money immediately from outstanding invoices to fund your business.
If your business already uses invoice factoring, now is the time to review it. Click here to find out about our FREE review. We could find you a better deal, improving your cash flow.
How does Invoice Finance work and what are the benefits?
Invoice finance is a cash flow solution that puts you in control of your cash position by releasing up to 90% of the value of an invoice, immediately, as soon as you issue it. In other words you get paid immediately, with the provider taking a service charge.
The benefits of this are that your balance sheet and credit rating will both improve, putting your business in a stronger position to take advantage of new commercial opportunities as they arise. In addition, without good cash flow you can’t take advantage of early payment deals from suppliers.
Choosing the right Invoice Financing Company for Your Business
The one problem is that there are over 50 invoice finance companies to choose from, all of them offering slightly different products, commission levels and terms and conditions. Senate Money can guide you through the advantages and disadvantages of each one, helping you to select the one best suited to meet your business’s needs.
There are 2 types of invoice financing in the UK
(1) Invoice Factoring
‘Invoice Factoring’ – also known as ‘debt factoring’ – usually involves an invoice finance company managing your sales ledger and collecting money owed by your customers themselves. They do all the hard work, but it does mean that your customers will know you’re using invoice finance. Here are the details:
1. When you raise an invoice, the invoice financier will buy the debt owed to you by your customer.
2. A 90% advance against all invoices raised will be available to you up-front.
3. Allows your customers up to 120 days credit terms.
4. They then collect the full amount directly from your custome.
5. Once they've received the money from your customer, they make the remaining balance available to you, less their charges.
6. You’ll have to pay them a discount charge (interest) and service fee.
(2) Invoice Discounting
With ‘invoice discounting’, the invoice financier does not take over your sales ledger or collect debts on your behalf, so it’s still up to your business to chase payment from your clients and customers. Instead, they lend you money against your unpaid invoices. This is usually an agreed percentage of their total value, and it varies from company to company. As you would expect, they charge a fee for their services.
As your customers pay their invoices, the money goes to the invoice financier. This reduces the amount you owe, which means you can then borrow more money on invoices from new sales up to the percentage you originally agreed.
If you use invoice discounting it can be arranged confidentially so your customers won’t find out.
The Advantages of Invoice Factoring Compared to Invoice Discounting
Advantages of invoice discounting include:
- It can be arranged confidentially, so your customers won’t know that you’re borrowing against their invoices
- It lets you maintain closer relationships with your customers, because you’re still managing their accounts
Advantages of factoring include:
- The invoice financier will look after your sales ledger, freeing up your time to manage your business
- They credit check potential customers meaning you are likely to trade with customers that pay on time
- They can help you to negotiate better terms with your suppliers
New Invoice Financing Products - Spot Financing
With the growth in Invoice Financing, new products are entering the market all the time. One of these new products is Spot Financing, which allows you to sell single invoices to the invoice finance company.
The product was developed because it was recognised that there can be times when a business wants to improve its cash flow, but doesn't want or need a full invoice financing facility. With Spot Finance it is now possible to obtain one-off invoice factoring against a single debtor.
Spot Finance, often called Single Invoice Factoring or Spot Factoring, is still relatively new. However, Senate Money can advise you on whether it is right form your business and how to select the best provider.
Spot Financing can work alongside other banking facilities such as overdrafts or loans but is not suitable for companies that already have a factoring or invoice discounting service in place.
Contact us about Invoice Financing
Contact us or call us on 01675 443878 for a free initial, no obligation chat. We can arrange an invoice finance solution which is exactly what your business needs.