How Invoicing Finance Works

Invoice finance is basically the practice of borrowing money from a company based on invoices yet to be paid. It involves your business paying the provider a fee and interest rate on the money borrowed until your client pays the invoice. Invoice finance can be divided into factoring and discounting. Invoice discounting is suited to more established businesses, generally who have their own in-house credit control facilities. With invoice discounting, you maintain control of your company’s sales ledger. There is also an option which allows the facility to be completely confidential – this is known as confidential invoice discounting (CID)

There are dozens of invoice finance providers online as well as commercial finance brokers. Once you have settled on a suitable provider, they will investigate your business to see how it functions. Their next step will be to analyse your annual income, number of clients and average amount of monthly invoices. They will also ensure that your company does not perform unusual invoicing practices before checking out the credit terms you offer to clients.

Finance Choices

The provider will then give you a choice between recourse factoring and non-recourse factoring. While recourse seems to be the natural choice because it is less expensive, it does mean that your company is responsible for the debts owed by the clients. Non-recourse carries a greater risk for the provider as they take responsibility for the debt.. Although you pay extra for non-recourse factoring, you can budget for it as there is no risk of being hit with an unpaid invoice from the provider months down the line. As you can see, invoice finance is a relatively uncomplicated method of getting your cash flow in order. There are several different choices available.

We can offer you financial solutions to help keep your cashflow healthy. Request a quote now to find out how much invoice finance can save you.


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