How Does Invoice Finance Work?
The concept is really very simple, rather than wait 30,60 or 90 days to get paid on invoiced work you obtain an advance of most of the invoice which allows you to focus on running your business. Once the invoice gets paid you receive the remaining balance of the invoice value, less any charges – 0.5-3% is not unusual but this will vary greatly dependent on the case.
Typically once accepted the invoice finance provider pays you between 85% up to 100% of the invoice value, usually within 24 hours.
There are different variations:
Factoring – If you select factoring, the provider chases your customers, takes responsibility for credit control and collects full payment from your customers.
Invoice Discounting – Sometimes called Discreet Invoicing because the customer may not know you are using invoice finance. The reason is simple. If you select invoice discounting, you retain full responsibility over the administration of your sales ledger and debtor collection. So you remain in full control.
Selective Invoice Finance – Sometimes called ‘Spot factoring’ this is the most ‘user friendly’ option. The reason is simple as you ‘select’ which invoices you want to use. So, no long term contracts and you remain completely in control.
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