Invoice finance is a generic term to describe a range of asset-based finance services, whereby businesses sell their accounts receivable (invoices) to a third party for a percentage of their value. It’s a useful financing tool for businesses whose growth is hampered by slow payment of invoices.

The main forms of Invoice finance are:

  1. Invoice Factoring
  2. Invoice Discounting
Did you know that you can get up to three times more cash with invoice funding? And that your borrowing power grows along with your turnover?


Understanding Invoice Finance

The growth of invoice financing

While invoice financing has been around a while, it is only in the last five years that its popularity has exploded as a viable method to fuel growth and maintain a healthy level of cash flow. As banks tightened their belts in 2008, the number of businesses using invoice financing increased by more than a third (48,903 to 67,676).

Since the turn of the millennium, the invoice finance industry has grown by 368%. There are providers ranging from small independent lenders who operate locally, to the subsidiaries of large multi-national banks.

Why has invoice factoring achieved such traction?

There are a number of reasons but a key driver is the increase in the number of late paying companies. The total amount in unpaid invoices is around £67.4bn and this amount has been rising year on year for some time. It’s more common now for the larger companies to use smaller companies cash-flow to support their own. This theory seems to have some credence when you see that 22% of all late paying invoices are form large companies. The habit started in the recession and has been continued since then.

Experian reports that between Q2 2014 and Q2 2015 the percentage of SMEs waiting for payments longer than 30 days increased by 9%. 

There are other reasons of course and here are small number:

  1. Invoice factoring is more flexible than overdrafts
  2. Decisions to lend against invoices can often be made faster
  3. The funding grows in line with the company turnover
  4. Typically you get greater level of borrowing against the assets

Definition

Invoice finance is a catch-all term for a number of products, including factoring and invoice discounting. There are other finance deals that allow you to borrow against other assets, such as stock and machinery. This is known as asset-based lending. With so many different products available, how do you know which will best meet the specific needs of your business?

We have produced a comprehensive, transparent invoice finance comparison site. The information provided here and on the pages below enables you the director, to make the best decision possible for your company’s circumstances. There is as much information on this website to help you make this decision, or at least narrow the field down to your top two or three. After that if you need help pick up the phone but this is your decision one way or another.

You can also buy on this site in the knowledge you have director’s protection no matter how the circumstances arose.

If you would like us to do the work for you or if you need advice, call 08000 24 24 51, or email info@businessexpert.co.uk.

We have produced this infographic to help you understand the process. (Click on the infographic to view full size).

Invoice finance

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 For more information, please refer to the following articles:

How does invoice financing work? 
Invoice finance risks, benefits and cost?
How do factoring and invoice discounting differ? 
When should you use invoice financing?
How can Invoice Finance Help?
How to change Factor or Invoice Discount Provider