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Invoice financing provides a business with the opportunity to borrow money based on what clients owe. An invoice finance facility works by borrowing against unpaid invoices, enabling businesses to access the money they are owed without delay.
Rather than waiting for the usual 10 to 90 working days to be paid, an invoice finance company can provide near-immediate access to the money owed to your business at a rate of 1.5% per invoice. After which, the full balance of the facility, complete with any associated borrowing costs, will be repaid at a later date.
Invoice financing for small businesses and larger organisations alike is fairly straightforward. As an alternative to waiting weeks or months to be paid by your customers, invoice finance provides access to the money you are owed right away.
Most SMEs are forced to contend with significant gaps between issuing invoices and receiving the payments they are owed. During this period, financial difficulties may be encountered as working capital is stretched to its limits.
Working with a top-rated invoice finance provider, this gap (and all association difficulties) can be removed entirely from the equation. Invoice finance costs are low and can help businesses of all sizes maintain optimum cash flow.
Typically charged at a rate as low as 3% and available to cover up to 85% of all outstanding costs owed, invoice finance is simple to arrange and comprehensively flexible.
Before setting up a business invoice financing facility, it is important to consider all the associated advantages and disadvantages. Terms and conditions vary between invoice finance providers, but the basics of invoice financing are fairly consistent.
A brief overview of the advantages of invoice financing:
The main disadvantages of invoice financing are as follows:
Weighing up the pros and cons means determining whether the cost of invoice financing justifies the benefits you gain access to as a result. As major complications can arise due to unpaid customer invoices, invoice financing can be highly advantageous for many SMEs.
For more information or to discuss the benefits of business invoice financing in more detail, contact a member of the team at Rosewood Finance today.
Invoice finance providers offer two main types of invoice financing: invoice discounting and invoice factoring. Both are designed to provide advance access to cash based on outstanding invoices, though they work in slightly different ways.
An invoice discounting facility involves the business overseeing its own credit control activities for payments made. It is a simpler type of invoice financing and involves a more hands-on approach, but it is also more resource-intensive for the business.
Invoice discounting in the UK is typically offered exclusively to high-turnover businesses of a more established nature. The invoice discounting company provides advance access to unpaid invoice costs, but it is the responsibility of the company to chase up customers to ensure they pay on time.
Invoice discounting fees and rates differ significantly from one provider to the next and are calculated in accordance with the requirements of the business.
Invoice factoring for UK companies is a more comprehensive solution for businesses using the facility. With an invoice factoring service agreement, the provider also provides a full credit control service on behalf of the business.
This means that the invoice factoring company itself takes care of ensuring your customers pay you on time and chase up late payments. These are effectively all-inclusive invoice factoring services, where the issuer provides advance payment on owed invoices and handles the logistics of credit control.
The benefit of this form of invoice factoring in finance is its simplicity. It is the preferred facility for smaller businesses and for those who lack the resources needed to cover their own credit control requirements effectively.
If you would like to learn more about the different types of invoice financing or have any questions about invoice financing costs, call Rosewood Finance anytime for an obligation-free consultation.
Entering into an invoice finance agreement can be highly beneficial, but it is not without its downsides.
Restrictions to consider before entering into an invoice finance agreement are as follows:
It is important to ensure you understand the potential advantages and disadvantages of invoice financing before submitting your application. At Rosewood Finance, we can provide you with the objective and impartial advice you need to determine whether invoice financing is right for your business.
Call Rosewood Finance anytime to learn more or email us anytime and we will get back to you as promptly as possible.
Here is a brief overview of how invoice financing works in practice:
All types of invoice financing work in roughly the same way: a lump-sum payment from the issuer to cover outstanding invoice costs, charged at a flat rate of around 3% (variable).
Yes, small businesses can use invoice finance to improve their cash flow. Invoice finance is a popular financing option for small businesses that have outstanding invoices and need to access cash quickly.
Invoice finance allows businesses spanning a broad range of sectors to leverage the cash they have tied up in their own outstanding invoices.
With invoice financing, you can tap into the money you are owed from your customers much faster, which can subsequently be used for any purpose. Plus, as you only borrow against the value of your customers’ active outstanding invoices, you never take on more debt than you can comfortably afford to repay.
The term “receivable finance” is simply an international term used in reference to what we know as invoice financing in the UK. The term is used more commonly in the United States in reference to the exact same product for businesses.
Other terms used in reference to invoice financing include trade receivable financing and trade receivable finance, which in both cases refer to the same product.
Eligibility criteria for invoice finance are comparatively relaxed when compared to most mainstream business loans. If you raise B2B invoices of any kind on a regular basis and routinely wait several weeks (or months) to be paid, you could be an ideal candidate for invoice finance.
Typical eligibility requirements include the following:
At Rosewood Finance, we specialise in cost-effective invoice financing solutions for UK SMEs. All with no obligation to go ahead at any time, coupled with the objective and impartial advice of our experienced team.
Call today for an obligation-free consultation or email us with details of your requirements and we will get back to you as soon as possible.
How much funding can I get through invoice finance?
Lenders calculate maximum loan sizes on the basis of several key factors and affordability checks. These include combined outstanding invoice values, the creditworthiness of the applicant’s business, the creditworthiness of their customers, the immediate financial outlook of the business, and more. Invoice finance products are normally capped at 85% of the total combined value of the applicant’s outstanding invoices at this time.
What fees are associated with invoice finance?
The fees associated with invoice financing can vary depending on the lender and the specific terms of your agreement. Common fees include service charges, interest charges, and credit insurance fees. It is important to carefully review and compare different lenders’ fees before choosing an invoice finance provider.
Is invoice finance suitable for all businesses?
As with all commercial funding solutions, invoice finance is suitable for some types of businesses, but not all. For example, businesses that regularly run into invoice disputes with customers (or have generally questionable relations with their slower-paying customers) could be taking a risk by entering into an invoice finance agreement.
What happens if my customer doesn’t pay the invoice?
In the event of non-payment of one of your own outstanding customer invoices, responsibility will fall with you to make the agreed repayment to your lender. Some invoice finance specialists offer protection facilities to mitigate such risks, which may incur additional fees.
How long does it take to get funding through invoice finance?
You may access the funds you need within 24 hours.