When it comes to finance, understanding which option is best for your business is crucial. There are lots of options out there, so it’s important to pick the right one for you. One of the options you may have come across is Invoice Financing. But is Invoice Financing the right option for your business?
What is Invoice Financing?
If you’ve sent a customer an invoice but you need the payment straightaway, you can sell your unpaid invoice to a lender for a fee. An invoice financier will lend you a percentage of the invoice value and collect their fee when your customer pays.
Types of Invoice Financing
Invoice Factoring is where the financier will purchase your invoice and collect the payments from your customers themselves. Once they have received payment from your customer, they will send you the remaining balance minus their fees and charges.
Invoice Discounting is very similar to factoring but the only difference is that you will be responsible for collecting payments. When your customer pays their invoice, the money goes to the lender who will then deduct their fees and charges. This can then become and ongoing process, giving you access to funds quickly when you need it.
Benefits of Invoice Financing
There are many benefits to this type of service, but you must still ask the question, is invoice financing the right option for your business?
If cash flow is a crucial part of your business operation, you may want to consider this option.
Invoice finance can provide your business with access to funds very quickly, allowing you to continue trading without slowing down.
Depending on which option you choose, an invoice financier can manage your sales ledger, giving your more time to focus on other aspects of your business.
Borrowing money from a bank can be a lengthy process, whereas invoice financing can be an extremely quick and hassle free alternative.
Depending on the option you choose, the process can be confidential, so your clients will not be made aware that you’re using it.