If you’re a business owner or entrepreneur and are looking for ways to access additional capital to help you grow your business, consider Invoice Fiance. Invoice Finance can be an effective form of a loan for certain types of businesses. This type of lending allows a business to capitalise its balance sheet and maximise available funds.
What is Invoice Finance?Invoice Finance (also referred to as invoice financing) is a form of a loan. It functions as a short-term loan that allows a business to borrow funds against the amounts owed to the company from their outstanding (e.g., unpaid) invoices. Invoice Finance is essentially an advance on funds that a business will eventually receive once the company’s customers pay those invoices. This type of finance can improve and increase a company’s overall cash flow. Invoice Finance is a type of debt instrument that provides access to more working capital at a faster rate than if a business waits for their invoices to be paid by their customers and business partners. Companies can use this early access to additional capital to address immediate expenses such as paying suppliers and staff, as well as using the funds to grow and scale a business. There’s no such thing as free lunch. Lenders charge a fee to businesses who use Invoice Finance services. The fee is generally a percentage of the amount of each unpaid invoice.
Other Terms Used to Describe Invoice FinanceThere are multiple terms to describe the concept of Invoice Finance. Here are some of the other names. Please note that in the UK it’s more common to say “finance” or “arrange finance” when referring to a loan. In the US “financing” or “financed” is the preferred lingo. Below are examples for each country. UK example: “The Coronavirus Business Loans Interruption Scheme (CBILS) is designed to help small and medium-sized businesses access finance.” US example: “Wells Fargo financed the $8m senior loan for Cog Company.”
Different ways to Say Invoice Finance and Different Types of Invoice Finance
- Invoice Finance or Invoice Financing
- Receivables Finance or Receivables Financing
- Accounts Receivable Finance or Accounts Receivables Financing
- Invoice Factoring – sub-product
- Invoice Discounting – sub-product
- Selective Invoice Discounting – sub-product
What Types of Businesses are Best-Suited for Invoice Financing?Not every business is suited for Invoice Finance. Invoice Finance is typically utilised across the following industries:
- Clothing and Apparel
- Recruitment, Staffing and Temp Job Agencies
- Wholesale & Distribution
What Type of Invoice Finance is Best for my Business?There are multiple types of Invoice Finance that each work slightly differently. Here are the types:
- Selective Invoice Finance