Invoice Financing can take place in many forms and variations however in a nut shell it gives a business the ability to release cash against unpaid invoice. Historically it was used as a lend of last resort, however over the last few years the market has matured and the stigma of using a cash flow facility seems just about to have disappeared. In fact we can give you many reasons as to why invoice discounting or factoring is far better than many traditional forms of bank finance.
Up until the last few years many businesses would use their overdraft to fund their working capital requirements. However as credit terms have been continually stretched many business have found it difficult to operate within agreed limits. Traditionally an overdraft facility has been set against the trading performance of the business and the amount obtainable will more often than not have been restricted by the ability of the business to provide tangible security in the form of bricks and mortar
Invoice financing is totally secured against the unpaid invoices which are assigned to the particular finance company. Unless an overpayment is required no other security is required. The great advantage is that the facility will grow with the business. More importantly providing the business is trading within the terms of the agreement there is no risk of the facility being withdrawn. This is not the case with a traditional bank overdraft which is payable on demand. We have seen many instances recently whereby the banks have withdrawn the facilities with absolutely no notice resulting in very difficult cash flow problems for the business. our advice is always go for a cash flow facility rather than the overdraft.
