Invoice finance is becoming ever popular with small businesses in the UK. The banks are failing to keep up with SME funding demands, and many businesses are being turned down for traditional loans and overdrafts, and so it’s becoming more mainstream to go the alternative finance lenders for help. With the government’s Budget looking to reinvigorate the small business lending environment, now more than ever alternative finance is starting to play a big part in the way the UK does business. But how does invoice finance – one of the most well established forms of alternative lending – work? It’s not rocket science but it pays to be in the know!
- You make your sale, provide your goods or services to customers and invoice them.
- You then send the invoice to your factoring lender.
- The lender will then be able to provide a percentage of the invoice’s value within 24 hours.
- Your factoring lender will then take on the responsibility for chasing customers for payment, creating a full credit control system.
- Your customer pays their balance, and the remaining percentage is released by the lender, minus a small lending fee.
This means that you’ll have quick access to funds that may otherwise have been tied up for months. Because of this, invoice finance is often used by businesses who struggle with late payment from customers, particularly when caught up in a supply chain.
The credit control facility offered by factoring services means it’s suitable for smaller businesses who may lack the infrastructure of an established invoicing procedure. If your business is a bit bigger, then invoice discounting offers a similar service but your business retains responsibility for chasing up customers. This allows you to stay in control of your customer relations and be discreet about your use of financing.
Invoice finance is flexible, accessible and can help a huge range of businesses. If your company issues invoices on credit terms of 30 or more days, then you could be eligible – take a look and see how your business could benefit.