Small to Medium Enterprises What is invoice finance?


Invoice Discounting provides funding against outstanding invoices so that every time your business raises an invoice, the invoice financier will release a percentage of the value of that sales invoice into cash within 24 hours of it being raised. The remaining percentage, less a small service fee, is paid to the business once payment has been received. This service can be confidential where your customer is unaware of the invoice financier’s involvement.

Is Factoring the same as invoice discounting?

Factoring is the same as invoice discounting but your customer is aware of the factor’s involvement because they undertake a full collection service, which includes sending out statements, making reminder calls and collecting in payment.
Businesses using a factoring facility can also save costs on postage, stationery, telephone calls and most importantly it allows the managers to spend their time more productively developing business instead of chasing payment.

Benefits of Factoring and Invoice Discounting

The benefits of an invoice finance facility to a business is that it not only receives an immediate cash injection into the business but it also gains access to an on-going source of funds that is linked directly to current sales. It can improve profitability as the business can pay suppliers early, buy in larger quantities and take advantage of any volume discounts that are available.

The beauty of invoice finance is that as businesses get larger and more successful, this innovative form of funding can grow with them. Whilst start-up businesses may initially use factoring to improve their cash flow, as they grow and become more established, they may consider invoice discounting which provides all the benefits of factoring, without the credit control.

In short, invoice finance not only helps to keep cash flow healthy but also provides finance for growth and allows the management team to do what it does best: driving the business forward.
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