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Can you secure lending against invoices?

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Updated: 3rd March 2021

How invoice finance can help you access new company borrowing

If you offer credit to your customers and operate a healthy sales ledger, you may be able to use the value of your invoices to obtain finance. Securing lending against invoices is a form of alternative finance called invoice discounting, and it offers flexibility and financial stability to eligible businesses.

Factoring is another popular form of invoice finance, but in this case the factoring company takes control of your sales ledger, and therefore invoice factoring is not a confidential process unlike invoice discounting.

So how does invoice discounting work, and are you eligible?

How to secure lending against your invoices

If you’re looking for further business funding, invoice finance in general offers significant benefits over traditional bank loans, and typically a faster application process. Additionally, there’s less reliance on a good business credit record, which further opens up access.

To secure lending against your invoices, you can apply to a range of invoice discounters in the UK. Our team at Real Business Rescue has strong connections with invoice finance providers around the country, and can offer recommendations based on your individual business needs.

Using your invoices to secure lending – how does it work in practice?

Invoice discounting utilises the value of your sales ledger to provide regular inputs of working capital throughout each month. Each time you issue an invoice to a customer, the invoice financier transfers a pre-agreed proportion of the invoice, usually within 24 hours.

This is typically around 80% to 90% of the invoice value, and the remainder is made available as soon as your customer pays, minus the financier’s fees. Clearly, this facility will boost cash flow, and makes use of a valuable asset.

Funding also increases as you increase sales, providing a reliable source of working capital, and more certainty for the future.

How is invoice discounting different to factoring?

Factoring

Invoice factoring involves handing over control of your sales ledger to the factoring company. In effect you are outsourcing your credit control function to the lender. Any creditors will be aware that you have passed control of your credit control process to a third party and they may consequently be able to assume that you have entered into a factoring arrangement. While some do not like this lack of confidentiality around the process, for other business owners factoring can free up valuable time and resources to grow the business, while also improving recovery of the company’s outstanding debts.

Invoice discounting

Invoice discounting secures lending against the value of your invoices, so the debt isn’t sold to the financing company. Significant benefits exist for businesses taking advantage of the inherent value of their sales ledger in this way, so what are the main benefits?

What are the advantages of securing lending against invoices?

These are just some of the benefits of invoice discounting:

  • Predictable cash flows so your business becomes more sustainable
  • More confidence in being able to pay bills as they fall due
  • Invoice discounting is a confidential form of invoice funding, so your customers won’t know that you’re using this method to raise finance
  • Funding naturally scales up along with your business

If your business operates with a steady customer base and minimal bad debts, opting for a funding method secured against invoices can be a good option. It allows you to reap the rewards of business growth over the years, and helps to provide a sustainable future.

If you would like more information on invoice finance, or any other form of alternative funding, Real Business Rescue can help. We’re the UK’s leading business recovery practice, and can provide reliable unbiased guidance on whether securing lending against invoices is suitable for your business. We offer free, same-day consultations, and operate an extensive network of offices around the country.

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