Invoice Finance allows you get your invoices paid up front without having to wait the payment term. At Choice Loans we can guide your through the options you have her which include:
- Invoice Factoring - good for one-off invoices and start-ups/small businesses
- Invoice Discounting - better for regular funding requirements and larger established businesses
- Invoice Trading - a combination of the above two but cheaper and faster if you have good quality debtors
You 'sell' your invoice to a factoring company who chase payment on your behalf. You get paid a percentage of the invoice up front and the balance when payment is made, paying a fee and interest for the finance used. It's ideal for:
- One-off transactions
- Out-sourcing credit control to professionals
- SMEs and start-ups as there is no minimum annual turnover required
- The downsides are that it's not confidential, you are not interacting with your customer and it can be expensive on a deal-by-deal basis.
This is when you enter into an agreement with the finance company so that all your invoices are funded as soon as you issue them. Its advantages are:
- It's confidential
- You retain control of your sales ledger
- It can be cheaper than factoring for growing businesses
- The disadvantages are that it's a longer-term agreement with minimum tie-ins. You will also have to fund all invoices this way whether you need it or not, and you usually need an annual turnover of at least £500,000, making it unsuitable for smaller businesses.
In recent years a third option has emerged. Invoice trading allows you to merge the flexibility of factoring with the lower cost and confidential nature of invoice discounting. It uses crowdfunding, where private investors compete with each other to give you the cheapest financing rates. There are some qualifying criteria for this to be an option:
- You must have an established business with a good credit record
- Your debtors must be established businesses with very strong credit records
- This option is particularly good when a business has one or a small number of recurring debtors. This is a 'concentration risk' that can concern some mainstream invoice finance companies.
To learn more or to apply for Invoice Finance (Factoring, Invoice Discounting or Invoice Trading) please either ﬁll in the call back form at the top of this page or call us on 01494 410 125 and we'll be happy to discuss your options with no obligation.
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"If you are looking to raise business finance I would strongly recommend that you make Choice Loans your first call."
Stephen Roberts - Robosco Solutions Ltd
What is needed to apply
Applying for a Invoice Finance is very easy. Below are listed the things you need in order to apply.
- Eligibility Criteria Good debtor book and ideally an established business with good credit.
- Documents Required Financial statements, Debtor ledger.
- Additional Comments We will walk you through your options to determine whether Factoring, Invoice Discounting or Invoice Trading are most appropriate to you.
- What percentage of my invoice can I fund up front?
It depends on your business but up to 90% is possible.
- What security is required?
This depends on which type of Invoice Finance you choose. If you go for Factoring or Invoice Trading then likely no security is required. Invoice Discounting usually requires a floating debenture over your business.
- How much does Invoice Finance Cost?
This depends on which option you choose (Factoring, Invoice Discounting or Invoice Trading) but there is usually a facility fee of 0.5-2.5% and also a charge for the finance on each invoice (again anything from 1-3% over BBR).
- I'm already with someone for my Invoice Finance; is it easy to switch providers?
Yes, it happens all the time.
- Is it possible to get Invoice Finance for Start-ups?
In some cases yes, it depends on your business and your projected turnover.
- Do finance providers require Personal Guarantees?
No, not always. The finance is secured against your debtor ledger and assuming this is adequate, a PG may not be required.
- Will it make my business look bad if I use Invoice Finance?
No, over 40,000 UK SMEs use invoice finance and it merely shows that you are prudently managing your cash flow. That should give all your customers and suppliers more confidence in your business.
- Is it possible to get Bad Debt protection or Credit Insurance?
Yes, one of our Invoice Finance specialists can arrange this for you, as either part of your facility or separately.
- If my business is in the construction industry, can I still get Invoice Finance?
Yes, there are some specialist lenders in this area.
- My Debtors are overseas, can I still get Invoice Finance?
Yes. We have providers that will arrange Invoice Finance for overseas debtors.
To learn more or to apply for a Invoice Finance please either ﬁll in the call back form at the top of this page or call us on 01494 410 125 and we'll walk you through your options at no cost or obligation.