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Invoice financing, a definition

Invoice finance is a form of asset based lending. The objective of invoice financing is to release cash tied up in unpaid invoices, thus providing businesses with immediate access to working capital.

How does invoice financing work?

• An invoice finance company will purchase the sales ledger from its business customer, which it will use as collateral against its loan.

• As soon as an invoice is raised by a business, it can borrow a percentage of the value of the invoice (usually up to 80%), for a fee.

What are the benefits of invoice financing?

• Cashflow is the lifeblood of all businesses. Invoice financing provides businesses with immediate access to working capital.

• Invoice financing grows in line with business growth, as funding is linked to sales.

• Unfortunately, late payment of invoices is an all too common problem for businesses. Chasing outstanding invoices is time consuming and can have a negative effect on the relationship between a business owner and its customer. Some invoice finance facilities offer the option of outsourced credit control. The benefit, business owners have time freed up to concentrate on business development

• Good sales ledger management ensures payment cycles are shortened. The benefits to businesses are:
• Important bills such as salaries, tax and rent can be paid regularly.

• Businesses will also have the capacity to deal with the unexpected, if and when it occurs.

What are the different types of invoice finance facilities available?

Invoice Discounting
Asset Based Lending
Export Factoring
Single Invoice Discounting
Bad Debt Protection 

What are differences between invoice financing companies?

There are many invoice financing companies in the market. They all differ in size and in their capability to lend. Some invoice finance companies can be flexible in their approach. Some can structure a combination of invoice finance products to meet the needs of business plans.

The majority of invoice finance companies base their criteria on a company’s:

• Sector
• Turnover
• Size of sales ledger
• Type of customer
• Invoice process

Working with you to find the most appropriate finance for your business.

Our objective is to save you time and money by finding the best and most cost effective invoice finance package for your organisation.

The Business Bureau has vast experience in invoice financing. So why not contact us now for an invoice financing quotation. We would be delighted to discuss your individual business requirements further.

ABFA (Asset Based Finance Association) Chief Executive Kate Sharp said in December 2011: “In general companies using invoice finance are enjoying both a strong uplift in sales and have sufficient funds to enable them to continue growing and trading successfully, which is exactly what our economy needs in these economically challenging times.”