Invoice Finance it is simply the use of outstanding debtors/accounts receivable to raise working capital and it is not a loan. It is suitable for any businesses that have unpaid invoices. It gives you quick and easy access to money owed by customers and helps with fluctuations in your cash flow. Help manage everyday business expenses it is a strategic method to grow their business.
How does Invoice Finance Work?
As your business delivers its goods/services to its customer, the invoices raised may be sold to a financier freeing up to 80% of their value almost immediately. The remaining 20% is advanced monthly based on collections. The business simply forwards copies of the invoices to the financier. Funds are advanced. The client controls over accounting functions and collections and the important relationships they have with their customers.
Invoice factoring is similar to invoice financing in that you still receive up to 85% of the invoice upfront from the lender. However, in contrast to invoice financing, invoice factoring involves actually selling your invoices to a third-party. Invoice factoring companies will collect the full amount of the invoice from the customer on your behalf. Invoice factoring provides short-term working capital in exchange for selling and assigning invoices to a factor. It is not the same thing as invoice financing (or accounts receivable financing), although the terms are often used interchangeably. Invoice financing is more streamlined, easier to use, and doesn’t require the assignment of invoices like factoring does.