At first invoice finance might seem confusing, so which option is right for your business? Whether you’re a small or medium sized company, you might find that a different choice is right for you.
Factoring is suitable for businesses looking to outsource all their invoicing procedures. The invoice finance lender will take over collection of payment from customers which frees up resources – for this reason it’s often the best fit for smaller companies without a dedicated finance department. However, clients will deal directly with the lender and so they’ll be fully aware you’re using a factoring lender. Though debt collection will always be conducted professionally, bigger businesses looking for more discretion may need to look at other options.
Factoring provides flexible funding for growing your business as well as funding exports and other day to day expenses. It helps with late payment issues and is a good option for businesses looking to boost their cash flow.
Invoice discounting is suitable for larger businesses with sound administration and a dedicated finance department – you will have full control of credit collection and so you are able to use it as an anonymous service. Your business will continue collecting all payments so you can be sure customers won’t be dealing with a third party.
This method of invoice finance has all the same benefits as factoring, helping to release funds from unpaid customer bills, remedying cash flow issues and stopping late payment becoming a problem.
If you’re looking into invoice finance then it’s worth knowing the difference between the routes available. Bigger businesses will have different priorities to smaller ones, so it’s important to make the right choice for your company.