Written by Welcome to our invoice finance guide, which may be better described as a guide to receivables financing. It gives more in-depth, detailed information than our product page.
Firstly, you should visit our invoice finance product page, which gives you what you need to know if you are considering using this type of business funding or if you are already in an arrangement and are thinking about checking rates or moving providers.
This guide gives you more detailed information about these products.
Invoice Finance Guide
In very simple terms, invoice finance means that a business can receive a “prepayment” against its unpaid sales invoices (typically between 70% and 100% of invoice value) so that they don’t have to wait for their customers to pay. When the customers do eventually pay, the balance of the invoice, minus charges, is passed onto the business. Sometimes, you may hear these services referred to as “debt purchases”.
If the business has a whole sales ledger of outstanding credit invoices, a large tranche of cash can be released in one go when the prepayments against each invoice are combined. Having this kind of financial facility in place can significantly improve the cash flow and working capital position of a business.
Invoice Financing Guide
The rest of this guide will explain the research we have undertaken regarding these products, the way they work and the different types of facilities that are available. It also includes funding levels, qualification criteria, how the pricing works and how to terminate an existing facility.
Funding only is known as an “invoice discounting” facility, whilst funding with a credit control service is called “factoring”. There are many variations, which are explained below.
Research Findings
We have undertaken extensive market research regarding receivables finance, and some of our key findings, which will be important to anyone considering using these services, are as follows:
- 98% of existing users would recommend invoice finance to other businesses.
- 87% of existing users said using these services enabled their business growth.
- On average, companies use these services for just over 5 years.
- Only circa 1% of UK companies use sales finance as there is very little advertising and promotion in the UK.
- 78% of existing users have not checked their pricing against the market in over a year. We have found substantial average savings for customers seeking cost reductions.
See our “30-second video guide to invoice finance” below:
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