Invoice finance, also known as accounts receivable financing, is a flexible funding solution that allows businesses to unlock the cash tied up in their unpaid customer invoices. Rather than waiting for customers to pay their invoices, businesses can sell these invoices to a finance provider, who advances a percentage of the invoice value upfront. This immediate access to cash helps improve cash flow and provides working capital to support business operations and growth.
There are two main types of invoice finance::
Invoice Factoring With invoice factoring, the finance provider takes full control of the sales ledger and credit control processes. They advance a percentage of the invoice value (typically around 80-90%) upfront and manage the collection of payments from customers. Once the customers pay, the finance provider releases the remaining balance, minus a small fee.
Invoice Discounting Invoice discounting is a more confidential option where the business retains control of its sales ledger and credit control processes. The finance provider advances a percentage of the invoice value (usually up to 85%) upfront, and the business remains responsible for collecting payments from customers. Once the customers pay, the business repays the advanced amount plus a fee to the finance provider.
Invoice finance provides immediate access to cash, enabling businesses to bridge the gap between invoicing and receiving customer payments. This helps improve cash flow, allowing businesses to meet their financial obligations, pay suppliers on time, and seize growth opportunities.
By converting unpaid invoices into cash, businesses can access the working capital needed to cover day-to-day expenses, invest in growth initiatives, purchase inventory, and meet payroll obligations.
Invoice finance grows in line with the business's sales, providing a scalable funding solution. As the business generates more invoices, the available funding increases, allowing businesses to capitalise on growth without the need for additional collateral or traditional loans.
Invoice finance providers often perform credit checks on customers, helping businesses assess their creditworthiness and reduce the risk of non-payment or bad debts. This can provide peace of mind and protect businesses from financial losses.
With invoice factoring, businesses can benefit from outsourced credit control services. The finance provider takes over the responsibility of collecting payments from customers, saving businesses time and resources while ensuring professional credit management.
Invoice discounting offers the advantage of confidentiality. Businesses can maintain direct relationships with their customers and manage their own credit control processes without disclosing their use of invoice finance.
Invoice factoring allows you to sell your invoices to us in exchange for an upfront cash advance. We take care of the credit control and collections, allowing you to focus on your core business operations. Once your customers settle their invoices, we release the remaining balance to you, minus a small fee.
Benefits of invoice factoring include improved cash flow, reduced credit risk, and outsourced credit control services. This solution is suitable for businesses of all sizes looking for a comprehensive financing option.
Invoice discounting is a confidential financing solution that allows you to retain control over your sales ledger and credit control processes. With invoice discounting, you can access a percentage of the invoice value upfront, which can be a valuable source of working capital. You remain responsible for collecting payments from your customers, maintaining direct relationships and preserving confidentiality. Invoice discounting is ideal for businesses that want to maintain their customer relationships while leveraging the value of their outstanding invoices to drive growth and manage cash flow effectively.
If you have specific invoices that require immediate funding, our selective invoice finance option provides you with the flexibility to choose which invoices to finance. This tailored solution allows you to address short-term cash flow needs by selecting the invoices that best fit your requirements.
At HR Commercial Finance, we offer a range of tailored invoice finance solutions to meet the unique needs of businesses. Our team of specialists understands the challenges faced by businesses in managing cash flow and working capital, and we work closely with you to provide the most suitable invoice finance option.
The funding speed can vary depending on the finance provider and the specific circumstances. However, with invoice finance, businesses can typically receive funding within 24 to 48 hours after submitting the eligible invoices.
In invoice factoring, if a customer fails to pay an invoice, the finance provider may take recourse against your business to recover the outstanding amount. In invoice discounting, the responsibility for collecting payment remains with your business, and you will need to repay the advanced amount to the finance provider.
Not all customers may be eligible for invoice finance. Typically, finance providers assess the creditworthiness of your customers to minimise the risk of non-payment. Some finance providers may have specific criteria or restrictions regarding customer eligibility.
Yes, if you opt for selective invoice finance, you can choose which specific invoices to finance. This flexibility allows you to address immediate cash flow needs by funding selected invoices while maintaining control over the remaining invoices.
The amount of funding you can receive through invoice finance depends on various factors, including your business's sales volume, the creditworthiness of your customers, and the finance provider's terms. Typically, businesses can access up to 80-90% of the invoice value.
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