If you are considering alternative funding for your business, invoice finance is a flexible option that can support your company’s cash flow. Factoring and discounting are both forms of invoice finance based on the value of your sales ledger.
Obtaining funding using the value of your invoices means that working capital is regularly topped up, and you can better predict your cash inflows throughout the month. You pre-agree a proportion that will be made available by the lender, and this is typically released 24-48 hours following issue of the invoice.
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Factoring involves transferring your credit control function to the lender, which can be beneficial if chasing payments is time-consuming or burdensome. With this option your customers will know that a factoring company has taken control of the sales ledger.
Invoice discounting involves a financier lending you the pre-agreed proportion of each invoice. It is a confidential arrangement, and you operate your credit control as normal. If you feel that your company’s image might be damaged by the involvement of a third party, invoice discounting may be a better option.
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With both forms of invoice finance, however, between 80-90% of each invoice is typically released. The remainder, minus the lender’s charges, are made available when your customer pays the invoice in full.
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