What is invoice finance?
Keeping cash flowing is one of the most important part of running any business.
Invoice finance enables you to do this by releasing cash which is tied up in outstanding customer invoices, giving you an immediate injection of cash and an ongoing supply of cash that grows in line with your sales.
Whether you are an owner operator struggling with working capital or a larger haulage operator looking for a cash injection for funding expansion plans, as long as you are trading on credit terms within the business to business marketplace you can benefit from invoice financing.
Companies pay a percentage of the invoice amount to the invoice financing company as a fee for releasing the money. Invoice financing can solve problems associated with customers taking a long time to pay and difficulties getting other types of business credit.
There are two main types: invoice factoring and invoice discounting.
What is invoice factoring?
Factoring enables you to access the value of outstanding customer invoices before they are paid. Factoring companies will provide the funding and manage your credit control, chasing and collecting outstanding invoice payments which saves you time and money.
What is invoice discounting?
As an alternative to invoice factoring, you could use invoice discounting, which is similar except that you, not the lender, are responsible for collecting payments from customers. With invoice discounting, the lender will advance you a % of the invoice amount. When customers pay their invoices, you pay the lender, minus a fee.
The main difference between factoring and invoice discounting is that with factoring, a lender will have full visibility of your sales ledger and maintain this by chasing debts on your behalf. Invoice discounting on the other hand, allows you to keep your credit control in house. Fees for invoice discounting are usually a lower, however a company must demonstrate they have the correct procedures in place to support an invoice discounting facility.
To find out whether invoice financing could benefit your business please click the link below.
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