![]() Here we break down the different types of lenders, and how they tend to work. This has improved the choice for borrowers. We work hard on your behalf to find the best providers for your circumstances – and we don’t charge a broker fee for our service.Īlthough people have historically used their own bank to provide funding, a number of new lenders have entered the market. Each lender has their own application process and criteria with their own areas of expertise. There are a number of different lenders who are active in the market. It’s charged based on the amount drawn down at any time and as such, you will save money when invoices are settled early, while it will cost more when invoices are settled late. The discount fee is the interest charged on the funds that you borrow. This fee is usually charged based on your turnover. The service fee covers the costs of managing your facility. The main costs can be broken down into two fees: Service fee The cost of these facilities is usually priced based on the financial strength of your business and its customers, plus the type of facility that you require. In some cases, where your customers are not credit worthy, you may find that some lenders will restrict the amount released for those customers, or even exclude them altogether.Īs such, it’s important that you consider the bigger picture when looking to maximise the amount released. For example, a £20,000 invoice would release £19,000 within 24 hours. The maximum you could borrow is 95% of the value of your sales invoices. How much can I borrow? How much of each invoice can I access upfront? These facilities are a great option for businesses who need to raise cash quickly, but usually have no need to raise cash against invoices. Once the facility is set up, you’re usually able to return to the lender again and fund other invoices very quickly. Selective invoice finance, also known as spot factoring, or single invoice finance allows businesses to raise funds against, one, or several invoices. ![]() The main advantage to this is that customers are less likely to become aware that you’re using invoice finance.Īlthough this may be a benefit, it does mean that you’ll still have to take time out to ensure that invoices are paid on time and in full. Invoice discounting works in much the same way as factoring, other than the fact that the borrowing company remains responsible for their own credit control. ![]() The main benefit (outside of helping cashflow) is that it can save a lot of time that would otherwise be lost chasing invoices. On top of funding invoices as they’re raised, the lender will ensure customers pay on time and will chase when they don’t.Īs factoring involves passing credit control to your lender, it can be great for smaller, or newer companies. Invoice factoring passes credit control services to your new lender and as such is the type of invoice finance that is the most visible to your customers and staff. This type of business borrowing can be broken down into a number of different products, they are: Invoice factoring Of course, any company supplying on payment terms of 30 days or more can benefit, regardless of industry. There are several industries that tend to benefit greatly and the most common are: This takes away the strain of having to chase invoices and risk damaging the customer relationship. This isn’t the only reason however, some types of invoice finance pass on the credit control process to their invoice finance provider. Invoice funding solutions are used by businesses who want to improve their cashflow, without having to wait up to 120 days for customers to make payment. Why do companies take out invoice finance? When the invoice is settled, the amount released by the lender is repaid, in addition to any interest and charges, with the borrower receiving the balance. ![]() Invoice finance providers lend you a percentage of the invoices you issue as soon as they’re issued, avoiding the need to wait for the payment terms agreed with your customer. Many businesses are turning to this option to take back control of their finances, allowing them the breathing space needed to move forward. ![]() This highly flexible form of borrowing can be used to free up funds from your debtor book, relieving the pressure placed on your cash flow. Invoice Finance is a commercial finance product which is used to release funds to a business, with outstanding invoices used as security. Invoice finance explained What is invoice finance? ![]()
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