What is Invoice Finance?
Invoice finance is a popular funding solution where businesses can access cash that is tied up in unpaid invoices, providing finance for cashflow or investment purposes- using an often-untapped asset on your balance sheet. Invoice Finance is a great way to unlock cash that’s stuck behind long invoice payment terms.
How Does Invoice Finance Work?
- Send invoices to customers after delivering goods or services
- Forward invoices to a finance provider for immediate cash, instead of waiting for customer payments
- The provider advances a percentage of the invoice value, typically within 24-48 hours
- When your customers pay, the provider deducts their fees and credits any remaining funds to you
Types of Invoice Finance
Invoice Factoring
Invoice factoring is when a business sells its unpaid invoices to a factoring company for immediate cash. The factoring company then collects payment directly from the business’s customers. After deducting a fee, any remaining funds are sent to the business. This process helps businesses get quick cash without waiting for customer payments.
Invoice Discounting
The business receives an immediate cash advance of around 70-90% of the invoice value from a lender. Customers continue to pay their invoices directly to the business, which then repays the lender along with any fees once payment is received. This approach improves cash flow while allowing the business to maintain control over its customer relationships.
Selective Invoice Finance
Businesses can choose specific invoices to finance rather than all of them. The business submits selected invoices to a finance provider, who then advances a percentage of the invoice value for immediate cash flow. This approach allows businesses to better manage their cash flow while keeping control over customer relationships and payment collections.
Benefits of Invoice Finance
- No risks to assets: Your unpaid invoices act as security for the loan, so you typically won’t need to provide additional security
- Quick to obtain: Invoice finance can be funded within 24 hours, which can be much quicker than traditional bank loans
- It’s scalable: You’ll be able to access more cash and improve your cash flow as your turnover increases
- It saves time: Invoice finance speeds up the business invoicing process, providing you with more time to focus on your business
If you think invoice finance is a finance solution that could help your business, Moorgate Finance can help. Give us a call on 01908 92 62 62 or head to www.moorgatefinance.com/apply-now to start the conversation.