What is invoice finance?
Invoice finance allows businesses to release cash tied up in unpaid invoices rather than waiting 30, 60, or 90 days for customers to pay. The lender advances a percentage of the invoice value upfront, then releases the remainder minus fees when your customer pays.
What is the difference between factoring and discounting?
With invoice factoring, the lender takes over credit control and collects payment from your customers directly. Your customers will know you are using a finance provider. With invoice discounting, you retain credit control and collect payment yourself. Your customers need not know you are using finance. Discounting typically carries lower fees but is usually only available to more established businesses.
What is a discount fee?
The discount fee is the interest charged on the amount advanced against each invoice. It is calculated daily on the outstanding advance from the date of funding until the invoice is paid. It is typically expressed as an annual percentage rate applied to the drawn balance.
Is invoice finance right for my business?
Invoice finance works best for B2B businesses with regular invoicing, good quality debtors, and payment terms of 30-90 days. It is less suitable for businesses with very small invoice values, consumer-facing businesses, or those with a small number of large customers due to concentration risk. Most providers require a minimum annual turnover of £100,000-£500,000.