What is an Invoice Finance Company?
If you’re involved with the day-to-day finances of a business, and you need to either manage cashflow for efficient day to day business operations or to fund business growth, you might have heard of or been advised to consider using an Invoice Finance company.
So what is an Invoice Finance Company?
An Invoice Finance company is a financial institution that specialises in providing money (working capital) to businesses by leveraging the value of outstanding invoices.
This enables your business to access money tied up in unpaid invoices while waiting for customers to pay. And working with an Invoice Finance company is part of many organisations’ financial strategies today – especially those with customers with 30 to 90-day payment terms.
Invoice Finance companies can be an important part of achieving and maintaining a healthy cashflow, allowing you to drive business growth or pay your team’s wages!
Unlocking cashflow with Invoice Financing
Invoice financing is split into two main options: Invoice Discounting and Invoice Factoring. The easy way to remember the difference is that Discounting is financing only with no credit control (chasing customers to pay bills), whereas Invoice Factoring offers a credit control service.
You can find out more on what Invoice Finance is, where you’ll also find answers to common questions, such as what happens if your customer doesn’t pay.
How does Invoice Finance work?
Invoice Finance typically allows you to access between 80 - 95% of the value of your unpaid invoices within 24 hours to ease your company’s cashflow, for a fee.
Here's how it works:
- Complete your work or sell your goods as usual.
- Invoice your customers and send a copy to your funder.
- Within 24 hours, the funder typically pays you up to 95% of the value of your invoices.
- The funder collects payments of the invoices on your behalf, acting as your outsourced credit control department if you choose Invoice Factoring, or leaves this up to you with Invoice Discounting.
- The customer then pays your funder what is owed.
- You'll then receive the remaining amount from your funder, minus any agreed fees
How can Invoice Financing Solutions help your business?
Businesses can realise a healthy cashflow with the use of Invoice Financing solutions, but there are many other benefits that may not seem as obvious.
Improved cashflow and room to grow
Invoice Finance used to help cashflow is often considered for immediate costs such as wages, operational costs, goods, and services. However, Invoice Finance can transform your business when used for growth opportunities. Having capital to extend a business, differentiate stock or even take on new team members can take your business to the next level.
Reducing the time spent chasing customer payments
If you choose Invoice Factoring, your business will also benefit from credit control, which removes the need for you to spend your valuable time chasing customer payments and could lead to your customers paying quicker. At Bibby Financial Services, we value your customer relationships but we also expect your customer to stick to your agreed payment terms. We can collect payment on your behalf on a confidential basis if required.
How do Invoice Finance companies differ from banks?
Although Invoice Finance companies provide your business with funding, it isn’t the same as taking a business loan out or other form of credit, which requires you to take on additional debt. As a business, you are leveraging something you already have, which is unpaid invoices; cash you have already earned, but not yet realised. The right Invoice Finance specialist can also work hand in hand with you to help improve financial processes.
What is the process for applying for Invoice Finance and what documentation is needed?
The process for applying for Invoice Finance may vary depending on the Invoice Finance company. It typically involves the provider firstly understanding the needs of your business and what aspects of support you require. The business seeking finance will need to provide information about their business, such as current and expected future turnover, invoice payment terms and profile of their customers. The funder will review this information and may request further information before making a decision. Once approved, and your facility is set up, you can typically access funds within a matter of days or hours.
What types of businesses are suitable for Invoice Finance?
From transport companies to construction, many types of businesses can apply for funding from an Invoice Finance company. If a business trades with other businesses on credit terms it could be suitable for Invoice Finance.
Summary
In a world where cash flow can make or break a business, Invoice Finance companies offer a valuable lifeline. Whether you choose Invoice Discounting or Invoice Factoring, these financial tools can be instrumental in keeping your business thriving, ensuring bills are paid on time, and seizing opportunities for growth.
Don't let unpaid invoices hold you back. Consider exploring Invoice Finance solutions to optimise your cashflow and take your business to the next level. Call 0808 501 6454 or fill in an enquiry form to arrange a callback.
