SMEs have always found it challenging to qualify for funding from traditional lenders. Invoice finance is a way for businesses to unlock the capital tied up in their outstanding invoices. You can get paid immediately, rather than waiting for 30+ days for your customers to pay. This allows you to turn your outstanding invoices into an immediate cash flow boost.
You effectively sell your accounts receivable to the finance company. The terms of a discounting agreement can vary, but you can expect to receive up to 70-85% of the value of your unpaid invoice upfront as a cash advance.
To qualify for invoice discounting, you will typically need to demonstrate a history of collecting invoices on time and have a dedicated internal accounts and collections department.
Invoice finance can help you to improve cash flow and better manage your working capital. You can speed up cash cycles and reinvest in your business faster than if you have to wait for customers to pay.
The finance company will perform credit checks on your clients before factoring an invoice, so you’re more likely to do business with customers that will pay on time.
Invoice finance is suitable for any business that sells to other businesses and offers credit payment terms. If your company struggles with working capital due to the gap between raising an invoice and receiving payment, it will be a good candidate for invoice finance.
The following industries can benefit most from an invoice finance facility:
- Construction
- Manufacturing
- Transport
- Storage
- Wholesale trade
- Recruitment and staffing
- Supplier of E-commerce trade
