Invoice Finance is simply the means of releasing cash against unpaid invoices. Invoice finance takes place in a variety of forms and can include invoice discounting, confidential invoice discounting, factoring, confidential factoring and trade finance. Which ever facility best suits your specific requirements the ability to release additional cash can certainly help a business with their cash flow.
Invoice discounting is simply the means to raise cash against unpaid invoices. It is normally offered on an undisclosed basis. As your customers will be unaware that you discounting your invoices it is more susceptible to abuse and as such it suits businesses which are financially strong, reputable and long established. In the current economic climate it is more difficult to get an invoice discounting facility for marginal customers. Costings for such facilities are comparable to a bank overdraft with a a charge over base for borrowing the money plus a small monthly service fee for operating the facility.
As factoring is done on a disclosed basis and your customers will be asked to make payment to the factoring company from the finance companies point of view the product is less risky and as such just about most businesses can obtain a factoring facility. In addition factoring comes with credit control whereby the finance company will chase your debts. This really does add value to product and as such you don’t always get what you pay for. Independent factoring companies tend to be be more proactive than banks factoring companies and as such there may be slight variations in costings.
Tags: Factorng, invoice finance
