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Boost Your Cash Flow With Invoice Finance

Cash Flow, and the management there of, is essential to every business.
Sometimes however, cash flow can be adversely affected by customers not paying on time or by other factors that are often outside of your businesses control.

This is where invoice finance can really help.

Invoice finance (or invoice factoring) is an effective way to quickly fix cash flow issues by securing funds against your outstanding invoices... simple!

To find out if you qualify for invoice finance, and to see how much you could potentially borrow, simply click on the "Start Free Quote" button below.

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3. Compare a range of quotes and see how much you could save.

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About Invoice Finance

Capital is essential for any business to not only survive, but grow to reach their full potential.

This is why when businesses experience cash flow issues it can be damaging to the day to day running of even the most basic of operations.

There are many different types of loans and financing avenues that a business can turn to when experiencing financial difficulties.

Invoice Financing however may be exactly what your business needs when looking to speed up the payment process.

What Is Invoice Financing?

Invoice Financing, also known as Invoice Factoring and Spot Factoring is a general term used to describe a range of asset-based loans.

A business will sell their invoices to a third party at a percentage of their value and receive funding within 24 to 48 hours, sometimes sooner.

Invoice Financing is primarily beneficial to businesses that are experiencing cash flow problems, particularly in relation to the slow payment of invoices.

How Does Invoice Financing Work?

Your business continues to operate as usual and invoice customers as per normal.
Your invoices are given to your Invoice Finance lender.
Your Invoice Finance lender then pays you a percentage of your invoices (usually within 48 hours). There is no set percentage which will be paid and will vary as agreed, on a lender-to-lender basis.
If your customers default on their payment(s), then you may have to chase this as you would usually when you have not received the payment from your customers.

However, some agreements can place that responsibility on your Invoice Finance lender.
Once your Invoice Finance lender receives their payment then you will be paid the remainder of your invoice, minus any fees that have been agreed.

Benefits Of Invoice Financing

Once your Invoice Finance lender receives their payment then you will be paid the remainder of your invoice, minus any fees that have been agreed.
The funding grows in-line with your business' turnover.
Typically, you get a greater level of borrowing against the assets.
This minimises the risk of late payments or defaulted invoices.
Decisions are made quickly so can help resolve any cash flow issues.

How Is Invoice Financing Paid For?

Invoice Financing is currently unregulated in the UK so it is important that you read the terms and conditions of your agreement carefully, as with any other class of finance agreement.

Basic costs to pay for Invoice Financing will generally be:

Service Charge:Covers the basic costs and will generally be charged as a % of your gross turnover. Typical rates often run between 0.75 % - 2.5%.
Discount Charge:Similar to interest payments found on standard business loans with the fee being levied against the money you draw down.

Generally, between 1% - 3%, the discount charge is calculated daily following the advance of the money.

Always remember that the longer it takes for your customer to pay, the more discount charge you will pay.

Requirements & Eligibility For Invoice Financing

Although one of the more accessible types of business loan, Invoice Financing does come with some eligibility criteria.

Your business trades with other businesses and not solely with consumers.
You are a limited company or LLP.
You offer industry standard credit terms.
Some lenders have a minimum "monthly invoices sent per month" requirements.
Your business must have a minimum turnover of £50,000.

Is Invoice Financing Regulated?

As briefly mentioned earlier, Invoice Financing is currently not regulated by the Financial Conduct Authority in the UK.

Although this shouldn't put you off as Invoice Financing is an extremely popular and safe method of accessing cash for your business, it would just be prudent to follow a check list:

Making sure the agreement period of your contract does not exceed 12 months.
All applicable fees are clearly stated and that there are no hidden charges.
A termination clause being included in the contract and how to trigger it should be clear.
Termination fees should never exceed 2 months minimum service fees.

What Is Bad Debt Protection?

Earlier it was mentioned that should your customers default on their payment(s), you may be responsible to chase up this payment but there will be some contracts where this will be on the responsibility of the lender.

Bad Debt Protection is a bolt on policy that will then place the sole responsibility of the lender to follow up on any defaulted payments.

If you work in a high-risk sector then this should be an essential part of your policy.

How Popular Is Invoice Financing?

Despite being around for years, popularity of Invoice Financing soared after the 2008 financial crisis where banks took a more stringent approach to lending.

This saw the amount of new Invoice Financing polices increase by a third.

Since 2000, the Invoice Finance industry has grown by a staggering 368%, with lenders ranging from international banks to independent and local lenders in the UK.

In fact, between the years 2015-2020 there was an increase of 2.5% of the Invoice Financing industry which is already worth £3 billion.

What Is Import Invoice Financing?

If your business trades overseas you will no doubt already be aware of the difficulties that come with this.

Import Invoice Financing however can help make things a bit easier.

Paying for goods in advance will often be met with a time-delay which can have a severe impact on your business's finances.

Import Invoice Financing effectively speeds up the payment process by allowing the importer to raise the funds before they actually receive the goods.

What Is Invoice Trading?

Invoice Trading, also known as Peer-To-Peer lending allows for businesses to auction off their invoices to prospective buyers.

This is typically done online and is an effective way of quickly improving a poor cash flow situation.

If your business trades internationally then this can be particularly useful, as it allows for trade with foreign debtors.

Can I Get Invoice Finance As A Small Business Owner?

Absolutely, many forms of business financing may not be suitable for a small/new business as lenders may require certain levels of credit and access to trading records whereas Invoice Financing is slightly different.

When assessing risk, lenders will look at the suitability of the company owing the invoices, not yours.

That's not to say that the standing of your business will not have an impact on the overall terms, but it is less of a factor.

Businesses with a stronger credit score and a more credible reputation can look forward to benefiting from much more favourable Invoice Financing terms.

How Can I Take Advantage Of Invoice Financing?

Hopefully that's cleared up some questions that you may have regarding how invoice financing can help your business.

Now the last one you most likely have, is "how can I apply for invoice finance"?

Well, the process couldn't be simpler; all you have to do is click the "Start FREE QUOTE" button to start comparing prices.

This is an absolutely free service and there's no obligation to commit, so click the button, follow the prompts and get comparing now.