Waiting for customers to pay outstanding invoices can disrupt cashflow and challenge the way business owners plan for future growth. However, invoice factoring can offer an effective, short-term funding solution for you and your business. This form of alternative finance enables you to immediately release cash tied up in unpaid invoices so you can get on with the day-to-day running of your business.
Invoice factoring offers a highly accessible alternative financing option for businesses that invoice customers for products and services. It is an asset-backed form of working capital finance that allows you to sell your unpaid invoices at a discount to a lender who will immediately – typically within twenty-four hours – release the funds as cash for your business. Your sales ledger is essentially used as an asset that you can borrow against to fund your business needs. It is a form of invoice finance which is a widely used business finance product.
Your lender will also take care of the collection of payments from customers. Unlike invoice discounting, your factoring company will chase customers for outstanding payments and provide a credit control service on your behalf. This enables you to focus on running and growing your business.
Our alternative finance partners offer highly competitive terms for invoice factoring arrangements. To find the best option for you, please complete our online application and you will receive a decision within 24 hours.
When you select invoice factoring as a convenient way to access finance, you agree that a lender or factoring company will manage your sales ledger and credit control. For a fee, they will immediately release a percentage of cash tied up in the invoices and chase your customers for any outstanding monies owed.
When you submit an invoice to a customer for products or services, you will also forward a copy to your finance provider, which is also known as a factoring company. Up to 100% of the value of the invoice will be released to you within 24 hours. You do not have to wait until the invoice due date to receive payment. The remaining balance will be credited to you minus the lender’s service fees once your customer has paid the invoice.
As well as offering a quick source of finance, invoice factoring is particularly useful for small to medium-sized businesses that may not employ an in-house finance team or function. As well as releasing capital from unpaid invoices, the lender acts as your credit controller and will collect payments directly from your customers. If collecting payments is not your forte or you lack the time to chase late payers, this could be hugely beneficial to you and your business.
Invoice factoring is an asset-backed form of alternative finance, so some lenders require your customers to have good credit scores. Factoring companies will also carry out credit checks on future customers on your behalf, enabling you to eliminate potential risks to your business. The cash released from unpaid invoices can be used for any business purpose, from assisting with cashflow and payroll to investing in new equipment or paying bills.
If you invoice customers for products and services on thirty to ninety-day payment terms, invoice factoring could offer you a flexible funding solution. Some lenders will require your customers to have good credit ratings. Invoice factoring is suited to small to medium-sized UK-registered businesses with a minimum annual turnover of £50,000.
Invoice factoring offers an effective funding solution for businesses that invoice customers and would benefit from the assistance of a credit control service. If you do not wish to relinquish control of your customer relationships, invoice discounting may offer a more satisfactory arrangement. If you are not eligible for invoice factoring, we can find the right source of alternative funding for you.