Author Box
Articles Categories
All Categories
Articles Resources

Invoice Finance: Practical Insights

April 03, 2012 | Comments: 0 | Views: 170


Invoice finance is a great way to improve cash flow and fund working capital. However in order to determine if it's the right finance for your business there are a number of questions to be asked and facts to be considered.

There is wide range of specialist lenders in the invoice finance market all with facilities offering a variety of terms and conditions, so it's important to fully understand the differences.

Two Main Invoice Finance Products

There are two main invoice finance products in the form of invoice factoring and invoice discounting. They work on a similar basis in that funds are advanced against a company's outstanding sales invoices, generally up to the value of 90 per cent. Both products require the borrower to be a business which sells to other businesses on credit.

The lender takes their security over the asset value of the sales ledger.

Invoice factoring is a fully disclosed service where the borrowers customers will be aware that the facility is in place and the will in fact make their payments to the lender. The lender will advance immediate funds on production of the sales invoice and pay the balance of invoice value less their fees when the customer eventually pays.

With invoice factoring it is normal for the lender to undertake ledger management and credit control.

Invoice discounting is classed as a confidential facility as the borrowers customers are not made aware that the facility is in place. Effectively the lender advances funds against the total outstanding sales invoices on the debtors ledger with movements on the funding account being controlled between the borrower and the lender.

With invoice discounting the borrower would normally retain full control of their ledger including debt management and credit control.

Key Information

The two main questions most borrowers have when enquiring about invoice finance facilities is how much they can borrow and how much it will cost.

1. How much can be borrowed?

Although there are instances of lenders and brokers stating borrowing of up to 95 per cent of sales value it generally does not exceed 90 per cent. It can often be lower as the lender will assess the risk in the debtors book based on the number of customers, spread of outstanding amounts and credit ratings.

2. How much will it cost?

There are generally two main costs involved: a service charge for the cost of running and managing the account and an interest charge applied to the amount advanced. There can be other costs such as set up fees and document fees which should always be confirmed in advance.

Other Important Information

It's important to clarify all the key aspects to the funding facility and take time to fully read and understand them taking appropriate advice at all times. Here are some additional points of importance:

1. Contract length

What is the term of the agreement and the notice period? Longer period terms will generally provide a better financial deal but flexibility may be more important.

2. Financial guarantees

Be clear on the full implications of any company or personal guarantees you have been asked to provide. It is always advisable to seek independent legal advice in these areas.

3. Termination clauses

It's important to know timescales, procedures and costs of termination as these can vary significantly amongst lenders.

4. Terms of operation

Be clear what these are as you will have to comply with them and contravention can be costly.


In summary our advice is that whilst invoice finance is a very effective method of funding working capital, it's important because of the variety of lenders, products and terms and conditions to take the time to ensure the facility meets your requirements and know the detail of what you're signing up to.

The Invoice Finance Company are specialists in invoice finance. To find out how invoice factoring or invoice discounting will improve your cash flow simply call us on 0845 459 7504 and speak to one of our specialist advisors. If you found this article useful visit our website at and give us a 'like'.

Source: EzineArticles
Was this Helpful ?

Rate this Article

Article Tags:

Invoice Finance


Invoice Factoring


Invoice Discounting

The 3 Month Payday Loans is most suitable options for the people who do not possess assets. There are a variety of loan options for the people who are willing to pledge assets against the cash

By: Cameron white l Finance > Personal Finance l July 09, 2013 lViews: 560

For many people, bankruptcy can make their world fall apart. The apparent loss of reputation coupled with the inability to take financial decisions can deter anyone from thinking clearly. But all is

By: noragwilt l Finance > Bankruptcy Lawyers l November 18, 2012 lViews: 303

If you are availing payday loans with monthly payments, it is easy for you to obtain quick money from online lending companies.By getting the best deals of loan, you can save money in terms of

By: Malen Cheks l Finance > Loans l November 16, 2012 lViews: 289

Loans online have become the popular source of income and people can make smart decision of taking it.Now, don’t go anywhere and sit in your home silently. Such deals would bring you money without

By: Marsh Jone l Finance > Loans l November 13, 2012 lViews: 288

Loans for the unemployed would let you feel comfortable with your unstable conditions due to jobless period.If you compare the rates of a few lenders, you would definitely get the suitable lender to

By: kelse roy l Finance > Loans l November 13, 2012 lViews: 467

By taking cash advance for bad credit, it is easy for you to improve your credit status. This loan is useful to relieve financial stress. This loan is totally free from credit verification and

By: Honard Nork l Finance > Loans l November 09, 2012 lViews: 301

The Australian Government has made changes to how Hire Purchases treat the Good and Services Tax. Will you be affected?

By: Scott C Bryanl Finance > Commercial Loansl June 11, 2012 lViews: 180

Business is a science supported by art. Successful businesses understand the balance between top line and bottom line. Remember during the "dot com" boom, companies were going public by showing

By: John H Tiltonl Finance > Commercial Loansl June 07, 2012 lViews: 170

Merely because the economy isn't so hot, it's not a good reason to stop borrowing money. Great business people are using the opportunities they're getting to grow their businesses, getting business

By: Karl Koschinskal Finance > Commercial Loansl June 06, 2012 lViews: 137

Invoice factoring has spurred many hot debates in the business community.  This alternative form of finance has had difficulty shaking its reputation as "the lender of last resort". Truthfully,

By: Lucie Minorl Finance > Commercial Loansl June 05, 2012 lViews: 213

Many oilfield service companies are short on working capital, which can be difficult to get for these companies with high cash demand and little collateral. It's time for these fast-growth companies

By: Lucie Minorl Finance > Commercial Loansl June 01, 2012 lViews: 210

Farming needs numerous work hours, dealing and fighting with frequent weather changes, and the risk of the unknown is always present. It also needs a huge initial investment and additional extremely

By: Kannoujia Tapasl Finance > Commercial Loansl May 24, 2012 lViews: 241

Discuss this Article

comments powered by Disqus