You invoice your clients as normal and also send a copy of the invoice to the lender.
You receive up to 90% of the gross invoice value straight away.
You receive up to 90% of the gross invoice value straight away.
The remaining 10% is made payable to your business minus the lenders fees.
Frequently asked questions
- What is Invoice Finance?
- How does Invoice Finance work?
- Is Invoice Finance a good idea for my business?
- How much does Invoice Finance cost?
- What are the advantages of Invoice Finance?
- What are the disadvantages of Invoice Finance?
- History of Invoice Finance
- Is Invoice Finance regulated?
- What types of Invoice Finance are there?
- The difference between Factoring and Invoice Discounting?
- What is the difference between a loan and Invoice Finance?
- Can I pick and choose which invoices to finance?
- Can a small business or start-up apply for an Invoice Finance Facility?
- What terms can I get on my Invoice Finance Facility?
- Will my customer know I am using an Invoice Finance Facility?
- How quick does it take to apply for an Invoice Finance Facility?
- What kind of invoice can I finance with my facility?
What is Invoice Finance?
Invoice finance allows your business to release cash from outstanding invoices. With B2B trading, businesses often trade on credit terms and it can take a while to get paid. Having an invoice finance facility removes this burden as you no longer have to wait 30, 60 or even 90 days to get paid. Your business can have that much needed working capital the same day you raise an invoice.
Invoice finance is a type of asset-based lending that is specifically used to increase cash flow. At Contact Business Finance we believe that a sales invoice is a company’s greatest asset.
How does invoice finance work?
Invoice finance is simple when you work with a lender that understands your business. With invoice financing you no longer have to worry about clients paying on time. You can get up to 90% of the gross invoice value funded to your business the same day you raise an invoice. The process is simple, as shown below:
You send your invoices to an invoice finance lender
They release up to 90% of the gross invoice value straight away
Depending on what type invoice finance facility you have, the lender can also assist with credit control and chase clients for outstanding balances
The remaining 10% is made payable to your business once your client pays, minus the lenders charges which are typically 1-3%
|Cash from the lender on day one (90%)||£900||£4,500||£9,000|
|Cash from the lender once client pays (10% minus fees)||£85||£425||£850|
|Lenders fee (1.5%)||£15||£75||£150|
How much does Invoice Finance cost?
There are over 60 different invoice finance lenders in the market who all charge different rates. This include banks, independent lenders and other finance houses. Your business will generally get a better rate if you have a large turnover. An invoice finance facility will generally cost anything from 1-3% of the invoice value.
What are the advantages of Invoice Finance?
Improves your cash flow – invoice finance allows you to grow your business by simply getting paid quicker
Pay suppliers promptly – invoice financing can sometimes pay for itself, as you can often get discounts from suppliers if you can afford to pay them sooner.
Release up to 90% of the invoice value – this is not only for future invoices, but you can also drawdown against your existing sales ledger if the invoices are not older than 90 days.
Speed – you can release cash from an outstanding invoice on the same day. Therefore, you no longer have to wait to get paid which means you can move onto the next job sooner.
More time – you no longer have the hassle of chasing payments depending on what type of invoice finance facility you go with.
Flexibility – there are different type of facilities available. You do not have to include all your invoices and you can have a facility tailored to your needs.
Less admin – depending on what type of invoice finance facility you go for. You will often find that you will have less admin / back office work to do.
Confidentiality – you have the option for the funding facility to be confidential.
What are the disadvantages of Invoice Finance?
B2B sales only – invoice finance lenders will only fund invoices that are raised to other businesses.
Terminology – not all lenders use the same terminology and it can be very confusing if you are new to the invoice finance market.
Confidentiality – to get a confidential facility you must be an established business and have the capability of producing management accounts frequently throughout the year.
History of Invoice Finance
It has been suggested that invoice finance originated BC in Ancient Rome. Roman factors assisted businessmen with financial transactions enabling them to buy and sell goods with lands far away. After the fall of the Roman Empire this early concept of factoring then spread to England and France in the 13th century.
Today, there are over 60 different invoice finance lenders in the UK that offer a wide range of other financial services. Choosing the most suitable lender from the outset is important due to the vast amount of options available.
Is Invoice Finance regulated?
What types of Invoice Finance are there?
What is the difference between Invoice Factoring and Invoice Discounting
Invoice Factoring – the lender assists with credit control and the facility is fully disclosed. This means that your customers will see the lenders notice of assignment and bank details on the bottom of your invoice.
Invoice Discounting – credit control remains with your business and the facility is confidential, therefore your clients are not aware that you have a facility. The lenders notice of assignment does not appear on your invoices.
What is the difference between a loan and invoice finance?
A loan allows your business to receive a sum of money in one transaction. Your business agrees the length of the loan and makes regular capital & interest payments. If you do not make regular payments, you can default on a loan. Therefore, it is not ideal if your business becomes quiet and cannot service the loan as it is crucial you make regular payments. Invoice finance is a more secure method of borrowing as you are only lending money against cash that you are owed in the first place. The difference is that you do not have to wait 30, 60 or even 90 days for your clients to pay. Invoice finance is better suited for regular cash flow as it allows you to constantly withdraw funding and feed money into the business. You cannot fall behind on your payments, as you are only borrowing money that is eventually going to be paid by your clients anyway. If your clients / debtors decide not to pay, there are insurances in place to make sure you and your business are protected.
What kind of invoice can I finance with my facility?
If you are raising an invoice to another business after work has been completed, there is a good chance you could be entitled to an invoice finance facility. You can include any invoice if it is no older than 90 days. Lenders prefer to work with businesses who have a clear paper trail before they raise an invoice. This paper trail ideally consists of an ‘order’ and a ‘sign off’. If the nature of your business is contractual and you do not necessarily raise an invoice on completion, there are still invoice finance lenders that can help.
Can I pick and choose which invoices to finance?
As a business owner, you have the right to tailor an invoice finance facility to your requirements so that it improves cashflow within your business. You do not have to include all your turnover with all invoice factoring companies and banks as each lender is different. At Contact Business Finance we will ensure you have the following options:
- Pick and choose debtors to fund – For example, you might have a client that always pays after 7 days, so there is no need to factor this invoice as the business will not benefit from receiving funds sooner.
- Pick and choose invoices – Selective invoice finance allows you to do this as you might only want to factor the larger invoices every now and again.
Include all sales invoices and receive the maximum amount of funding available.
Can a small business apply for an Invoice Finance facility?
Invoice finance is available to any business that supplies good or services to another business and offers them payment terms. We offer free, impartial advice to start ups and well-established businesses. Please read our testimonials page to see what some of clients have to say.
It is also worth noting that our Managing Director, Bobby Russell does love an underdog and often passes sales enquiries to clients that have recently started in business where he can.
What terms can I get on my Invoice Finance Facility?
The terms your business gets depends on many different variables such as turnover, sector, experience, debtor quality, to name a few. We make it our job to ensure your business gets the best terms available in a market that is constantly changing. It is paramount to us that we source a finance facility that not only improves cashflow, but also works for your business long term.
Will my customer know I am using an Invoice Finance Facility?
This depends on what type of invoice finance facility you have. Confidential invoice discounting, as the name suggests allows clients to keep the facility undisclosed and confidential, so your clients do not need to know. Click here to find out more about invoice discounting.
How quick does it take to apply for an Invoice Finance Facility?
You can apply for an invoice finance facility today and see how much cash it could potentially release. Depending on the complexity of the facility required and the nature of the business, invoice finance facilities often take anything from two days to one month to finalise. If it is speed you are after, we work with several lenders who can make decisions on the same day.
Is Invoice Finance a good idea for my business?
Invoice financing is great tool for your business if you need regular cashflow and are tired of waiting for payment from your clients before moving onto the next job. If you are a growing business that is in a position to take on more work, then we strongly recommend that you talk to us for free.