What is Invoice Finance?
Invoice Finance is an effective way of quickly accessing a proportion of the value (up to 90%) of your invoices, usually within 24-hours of them being issued, so you can access cash at the point you sell products and services rather than waiting between 30-90 days for your customers to pay.
Unlike invoice discounting, lenders not only provide the funding, they also manage your credit control and sales ledger, and are responsible for chasing and collecting outstanding invoices.
How does it work?
Your business sells unpaid invoices to a lender in return for a proportion of their value (up to 90%).
You sign an agreement with a lender which will detail the proportion of the total invoice value you will be paid immediately (usually called the initial percentage or prepayment percentage)., what balance will be paid to you when your customer pays the invoice in full, and how much you will pay the lender for providing the facility. Your relationship with the customer changes, as you are no longer responsible for collecting payments and managing credit control. Instead the lender takes on this responsibility and will have direct contact with your customers.
In some cases the lender may agree for the Client to act as ‘agent’ in chasing debtor payments on their behalf so that the Client can retain the customer relationship rather than passing this responsibility to the lender.
What are the benefits?
• Speed – Lenders advance up to 90% of your outstanding invoice values into your Bank account within 24 hours
• Cost-effective – Lenders collections service means you needn’t employ a credit control team
• Time – Lenders employ expert teams who are able to handle your entire credit control and sales ledger management should you require
• Quality – Lenders have very professional and sophisticated sales ledger management systems and are well versed in the service demands of Clients both large and small. Many in fact, provide service level guarantees.
• Personal – Lenders have local offices and relationship managers to ensure they deliver a more personal service and offer quick decision making
• Control – Lenders provide you with the ability to manage your funding at all times with access to their online management system
• Confidential – Most lenders provide a confidential invoice finance service. This is where your customers are not aware thate you are using an invoice finance facility
• Security – lenders can protect you against customer insolvency with Bad Debt Protection (Optional)
How can we help you?
The Finance Exchange is an industry leading ABL advisory business, where our expertise is purely focused on aligning your specific business and finance requirements with the right lenders and then helping you to achieve the right terms and facility structures for your business. Given our ‘analytical’ and ‘attention to detail’ approach, we are used to working with management teams and ‘taking the strain.’ with prospective lenders, whilst allowing you to focus on your business.
If you would like our support or have any questions, why not contact us? We are here to help!