Invoice finance is simply the means of releasing cash against unpaid invoices. Typically 80% of the invoice is paid upfront by the invoice finance company. On payment of the invoice by your customer ( typically after 90 days) the remaining 20% is paid to you less any charges due to the invoice finance company.
An invoice finance facility will unlock cash and assist with a businesses cash flow. Unlike an overdraft facility which is fixed at a certain amount invoice finance will grow as a business expands . In addition an overdraft facility is repayable on demand and so there is always the risk it could be withdrawn. In recent months we have certainly seen this happen as bankers continue to be nervous and unsupportive in these difficult times. The security that banks require to agree an invoice discouning facility also tends to be more onerous with property often required to secure a facility. An invoice finance facility relies on the unpaid invoices as security.
Typically a factoring faciltiy is provided on a disclosed basis and offers a full credit control service. Confidential invoice discounting is normally on an undisclosed or confidential basis and is just a means of providing cash flow because credit control is kept in house. There are many variations offered by numerous invoice finance facilities and different finance companies have different niche products and attributes. A good invoice discounting broker will be able to advise as to which funder will be best for your particular needs.
