Invoice factoring is an alternative way for businesses to get funding for growth and day to day operation. Whereas bank loans might be hard to get hold of, invoice finance is often much more accessible.Read more
What is invoice factoring?
Invoice factoring lets businesses release the capital tied up in unpaid invoices. This helps with the widespread problems of late payment felt across the SME sector, and helps to create more flexible cash flow letting businesses function better.
How does it work?
Businesses can release some or all of their invoices to a factoring lender, who can then lend 90% of their value within 24 hours.
There are a couple of types of invoice finance. If the company opts for factoring, the invoice lender will chase up clients for payment. This is ideal for small companies without a dedicated finance department.
Invoice discounting, however, lets companies stay in control of their customer relations, by letting them retain responsibility for collecting payment. Larger companies with greater resources often opt for this.
Once the customer has cleared their invoice, the remaining 10% of the funds will be released, minus a small lending fee.
Who can use invoice finance?
Any companies who issue invoice credit terms of 30, 60 or 90 days to customers can take advantage of factoring and invoice discounting. This incorporates many sectors, from recruitment to construction – this is a very versatile form of finance.
What are the benefits?
Invoice factoring helps to reinvigorate stagnated cash flow. Late payment can strangle companies caught up in supply chains, and even those with full order books might struggle. This form of lending also means the company isn’t taking on any new debt, which is attractive in the current economic climate.
Select Factoring has a range of invoice factoring solutions, so contact us today to see what we can do for your business.