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Invoice Finance - Advice
Invoice finance can potentially offer companies a quick-fix liquidity solution to assist them in meeting cash-flow requirements. And in these economically challenging “credit crunch” times, where cash is very definitely king, invoice finance can be a life-saver.
So what is invoice financing and how does it work?
Basically, cash can be borrowed against invoices raised by businesses, thereby providing working capital straight after an order has been completed.
Companies often use “factoring” in invoice finance – whereby the invoice finance company - the “factor” - fully manages the company’s sales ledger and provides it with credit control and collection services for all outstanding debts, so helping to protect the business from the threat of late payers or bad debts.
Advances against invoices can be as high as 100% - though 80-90% is more usual, and funding can be for anything up to 90 to 120 days dependant upon the credit terms already agreed between the company and its customers, the debtors. Funds are usually released to the company by the factor within 24 hours of issuing the invoice.
Contrary to popular belief, invoice finance is not necessarily a costly process. In fact, for larger companies, invoice discounting facilities are often cheaper than overdrafts and when you consider the time freed up in managing the sales ledger, the potential for improved sales due to improved cash-flow and the overall removal of hassle in chasing payments, invoice finance is often a very sensible approach to take.