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Invoice finance allows you to show your valid invoices to a lender and receive up to 100% of its value upfront- with the option to repay over 30 to 90 days when your invoice clears.
It is a type of loan that allows your business to borrow money against pending customer invoices. Once you have applied, the lender advances a percentage of the invoice value (up to 100%) and charges interest as well as a service fee. Often, this all takes place within 24 hours of application.
There are several different types of invoice finance. Each involves releasing cash from invoices, but are all slightly different. The most common forms of invoice finance are: invoice factoring, invoice discounting, and selective invoice finance.
Use Proper Finance today to find secure, trusted invoice finance. Get a decision within minutes and receive funds within 24 hours. Check your eligibility using the form provided.
What Types of Invoice Finance Are Available?
When considering invoice finance for your business, it is important to weigh up what type of invoice finance is the most suitable. Below is a list of the different types of invoice finance:
Invoice Discounting. With this form of invoice finance, it is the business rather than the invoice financing company that maintains control of the collection of payments from the customers. Therefore this financing agreement remains confidential and will therefore not affect client relationships.
Invoice Factoring.This form of invoice finance involves outsourcing collection of invoice to the invoice financing company. Because the factoring company will deal with the customer directly about payments, the customer will be aware of the arrangement. However it is possible to get confidential invoice factoring. This is where the provider manages control of the credit, but uses branding from the business for which it is collecting.
Selective Invoice Finance.This is sometimes known as spot factoring. With this form of invoice finance, the business chooses which invoices or accounts that it wants to finance.
Recourse and Non-Resource Invoice Finance. Recourse invoice finance is when the business is liable for the debts of their customers. If the lender is unable to collect payment, the business is liable to refund the cash advance for that invoice, essentially buying it back. Non-recourse factoring is when the invoice financing company takes the risk for the customers’ debts if they are unable to pay. This option is often more expensive.
How Much Can I Borrow With Invoice Finance?
The amount of funding a business can get with invoice finance depends on the value of their outstanding invoices. Typically, businesses can receive up to 80-90% of the value of their invoices upfront, with the remaining amount paid once the invoices are collected.
With Proper Finance you can borrow anywhere from £5,000 to £5 million. This amount is decided on a case-by-case basis, and you can get a free quote using our form.
Invoice financing is a fantastic funding option for businesses for a number of reasons such as:
Invoice financing usually provides far more flexibility in terms of repayment options for companies than you would typically get through other funding options like a business loan or overdraft
In most cases, you can get a higher level of borrowing against the assets you have
It can help mitigate the risks associated with companies through defaulted invoices and late payments
Invoice finance funding typically grows in-line with the business’s turnover
Invoice finance lenders usually make fast decisions about lending against invoices, providing you with peace of mind.
How Long Does It Take To Set Up Invoice Finance?
The time it takes to set up invoice finance can vary depending on the finance provider and the complexity of the business’s financial situation. Typically, the process can take anywhere from a few days to a few weeks. However, with Proper Finance, clients have received funding in less than 24 hours.
Can I Get Invoice Finance With Bad Credit?
If you are concerned that your company’s bad credit history (or if you are the business owner, your own bad credit history) will inhibit your ability to make an application for invoice finance with us, there is no need to worry. Proper Finance is happy to announce that we work with a number of leading invoice finance lenders who are happy to accept applicants who have bad credit. Nevertheless, one thing to keep in mind is that you may have to pay higher levels of interest for the funding you have received.
What Is the Criteria for Invoice Finance With Proper Finance?
Before making an application for short-term finance with us, it is important that you make sure you have met the initial eligibility criteria for applying for an invoice finance lender through Proper Finance. Whilst additional criteria may need to be met by individual lenders, you will first need to make sure that you are:
A UK based resident
Are aged over 18
Have a valid UK debit account
No recent defaults on file
You have the ability to meet monthly loan repayments
UK mobile number
How Do You Get Paid by Invoice Financing?
Invoice proof: Show the invoice to your invoice financing company.
Verification: The company then verifies your invoice.
Receive money: You will receive money from the provider, which is taken from your invoices as they are paid. The provider repays you any leftover money, minus fees.
Invoice Factoring Example
If an invoice financing company releases 90% of a £60,000 customer invoice, the business would receive £54,000. When the customer pays the invoice in full, the provider would then pay the remaining £6,000 into the business account, minus the total fees and interest of 3%. This means that the business would receive£58,200 and the provider would receive £1,800.
What Sorts of Businesses Benefit From Invoice Financing?
Small businesses often struggle with cash flow and may not have the resources to wait for customers to pay their invoices. Invoice financing provides immediate cash flow, allowing small businesses to operate and grow. This includes:
Service-based businesses often have long payment cycles and may not receive payment until a project is completed. Invoice financing can provide immediate payment, allowing them to operate and take on new projects. This type of business includes:
Public relations agencies
Cleaning and janitorial services
Seasonal businesses, such as retailers and tourism companies, may experience fluctuations in cash flow throughout the year. Invoice financing can provide the funding they need to operate during slow seasons and prepare for peak seasons.
Can Invoice Finance Be Used for International Invoices?
Sometimes. Many finance providers offer invoice finance for international invoices, but the eligibility criteria and fees may vary depending on the country and the currency involved.
What Is Invoice Financing Used to Pay For?
Invoice financing can be used to cover any business cost, but it is often used for the following:
Rent of office space
Marketing and advertising
Purchase of equipment
Hiring and recruitment
How Much Does Invoice Financing Cost?
The cost of Invoice Finance will not only vary between different invoice financing companies, but will also depend on a number of other factors, such as:
The sector within with the business operates (retail, construction, etc)
The trading history of the business
How long customers have generally taken to pay the business.
Costs generally involved in invoice finance include:
A charge for releasing the money, as a percent of the value of the invoice
A service charge (also known as a credit management fee). The cost of this will be higher if the business chooses invoice factoring rather than invoice discounting. This is because, with factoring, the provider is taking charge of customer accounts and credit control.
Additional costs many also include:
Overdue fees if customers do not pay their invoice on time
Credit protection fees
Termination fees if the business decides to end the arrangement early
What Happens if Customers Don’t Pay Their Invoices?
With invoice factoring, the finance provider will take over the collection process and may take action to recover the debt if necessary. With invoice discounting, the business retains responsibility for collecting the debt and may be required to repay the loan if the invoices remain unpaid.
How Does Invoice Finance Differ From Regular Bank Loans?
Invoice finance provides businesses with immediate cash flow based on the value of their outstanding invoices, whereas traditional bank loans require collateral and may have a longer application process. Additionally, invoice finance is typically more flexible than traditional bank loans, as the amount of funding available can be adjusted based on the business’s invoicing volume.
How to Apply for Invoice Finance With Proper Finance
Submit an application: Use our quick, convenient form to give us some basic information about your business, such as its financial history and current outstanding invoices. If your application is approved, the factoring company will create a factoring agreement that outlines the terms of the factoring arrangement, including the fees and services provided.
Sell your invoices: Once the agreement is in place, you can start selling your outstanding invoices to the factoring company. The factoring company will provide you with immediate cash for the invoices, minus their fees.
Receive payment: The factoring company will then collect payment from your customers on the invoices you’ve sold them. Once payment is received, the factoring company will return the remaining amount, minus their fees, to your business.
If your application is approved, your application will move forward to the next stage, and you may receive your funding in less than 24 hours!
Why Choose Invoice Finance With Proper Finance?
Fast decisions: Once you have completed an online form via our site, you will receive an quick decision regarding the outcome of your application and whether you can proceed to the next stage of the process. This means no time is wasted.
Secure: We take our customers’ security very seriously. All information provided on our website is encrypted and our website is hosted on a secure server.
Impartial: We compare the whole market instead of simply pushing one product. You can be sure of an objective quote with us.
Free to apply: Getting a quote will cost you nothing. Apply today and see how much you can save.