Invoice financing is a term you might have heard without necessarily knowing what it is and how it can help you. There are broadly two types of invoice finance available; invoice factoring and invoice discounting, and both are efficient depending on the situation where it applies to.
Invoice Discounting enables businesses to gain instant access to cash tied up in unpaid invoices and tap into the value of their sales ledger. When you invoice a customer or client, you receive a percentage of the total from the lender, providing your business with a cash flow boost is when you do for your business the credit control about any payments done to your account.
Invoice Factoring is similar, but your customers will know that the lender is involved and provides ‘credit control’ services to make sure customers are paying on time the money owed to you. Customers will know when you are using a factoring provider because they lender will be chasing late payments in your behalf
But why might either of these options be good for your business?
- Helps boost credit sales and converts credit into cash, meaning a faster growth and development to your business instead of waiting for invoices to be paid.
- No assets are involved as invoice financing acts as an unsecured business loan in the place of invoices.
- Faster turnaround times as you are able to send your invoices for financing.
- Lets your business receive cash from invoices as soon as the invoice is issued.
As with any other financial product, each case is dealt with separately, and can be tailored to maximise the outcome. If you think your business may be able to take advantage of this type of financial product, please get in touch with your local ASC office to find out more details.