Invoice financing – what you need to know

Business Finance, News

Invoice financing provides flexible funding based completely on your outgoing invoices. As your business sends out invoices to your customers, your lender will cover the amount correlating to the total invoices owed.

As such, invoice financing provides an excellent solution for growing businesses, SMEs and any company with cashflow problems. Lenders will offer you a percentage of the unpaid invoice when it is initially issued to your client and will give you the balance of the invoice when it is paid, minus their own internal fees plus interest.

Invoice financing – two types

There are two distinct types of invoice financing.

  • Factoring describes the situation where you give your invoice finance provider complete control of your debtor book and credit control, whereas
  • Invoice discounting occurs where you raise money and loans against the invoices, but maintain control of the relationship with your clients and are responsible for chasing up customers for payment due.

Who uses invoice financing and how does it help businesses?

A huge number of businesses use invoice financing, and it is one of the most popular forms of financing for growing businesses, especially in the UK. Because invoice financing is based on your debtor book, securing finance is extremely easy and accessible to firms. Equally, by only borrowing money directly correlating to planned income sources, businesses know that they are very unlikely to get into debt with this type of financing solution.

Unlock capital quickly

Growth can quickly be achieved through invoice financing, as it allows companies to unlock capital as soon as they issue invoices. This means instead of having to wait for the invoice to be paid, which may not be easily timetabled, invoice financing will allow you to bridge that gap, offering you funds with which to develop growth and invest in assets.

No long-term contracts

The beauty of invoice financing is that there is no set limit on how frequently you use it, and there are no long-term contracts with high-interest repayments – companies can raise as much money as they need against existing invoices, and can choose to repeat the process in the future if they so need.

Industries that are most suited to Invoice finance:

• Recruitment business
• Subcontractor business
• Manufacturing
• Distribution + Wholesale
• Transport
• Printing

Invoice financing – where to find out more

At Tower Leasing, we pride ourselves on offering flexible leasing and finance solutions to all businesses, creating tailored solutions to suit all of your business needs. For more information, please contact us.

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