Invoice finance has become an increasingly popular way of financing a business. And here’s why.
Research by UK Finance, a trade association for the UK banking and financial services sector, found that “small and medium sized businesses in the UK were on average, having to wait 55 days to get paid on an invoice.
And of course, that can put enormous pressure on your cash flow, with all the stress and sleepless nights that brings.
But why wait 55 days to get paid when you could have up to 95% of the value of the invoice within 24 hours?
The solution is Invoice Finance.
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What is invoice finance?
You have provided your goods, products, or services to your customer. The normal terms for payment of your invoice are 30 days. However, your customer regularly takes 60 days to pay.
So, instead of waiting for your customers to pay your invoice, you borrow the money against the value of the invoice, meaning you get a percentage of those funds paid into your business without having to wait for the invoice to be paid.
That’s invoice finance.
Of course, it means you must no longer wait for an invoice to be paid and funds to come into your bank account. Instead, using invoice finance, the funds are paid to you immediately upon presentation of the outstanding invoice.
Imagine for a moment, as a small business owner, what you could do if you had let’s say, an extra £25,000 in your bank account?
Employ extra staff, embark on a new marketing campaign, install a new IT system.
Over the last decade in particular, invoice finance has become an increasingly popular and effective way of helping improve the cash flow issues for a business. So much so, that invoice finance has become a viable alternative to the more traditional option of a bank overdraft, and indeed often provides more flexibility.
What are the different types of invoice finance?
Because of its increasing popularity as a source of business finance, there has never been so much choice for the business owner when it comes to raising invoice finance.
There are various invoice finance solutions available and they all operate in different ways and have different qualifying criteria, but essentially the main options are as follows:
- factoring
- spot factoring
- invoice discounting
- selective invoice discounting
If you’d like to find out more about how our invoice finance solutions could help you overcome cash flow issues within your business, book a call with one of our invoice finance brokers. For other business finance options, learn more about asset finance, commercial mortgages and unsecured business loans.
