Calculate how much funding your business could release against the value of your sales ledger and discover which invoice finance facility could be best for your requirement
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The list of invoice finance providers on this page is a selection of services available and gives you an idea of the kind of options available. You can find out more about the individual products by visiting any of the providers listed. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts.co.uk will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts.co.uk recommends you obtain independent financial advice.
Invoice factoring is when a business sells its accounts receivable to a factoring provider. The factoring provider gives your business a loan against the value of these outstanding invoices, allowing you to receive payment immediately rather than waiting for your usual customer credit terms. The factor company will also manage the collection of these invoices directly unless you choose a hybrid form of factoring called CHOCs (customer handles own collection service).
The invoice factoring specialist will need to assess the risk of giving you invoice finance. This means they need to assess the risk of not being paid in full. They do this based on the volume and size of your invoices, payment terms, the creditworthiness and payment history of your clients, the industry you are in, your company history and track record.
With Hilton-Baird Financial Solutions, our preferred invoice finance broker, we’d like to help you to identify the right invoice finance solution for you. Visit Hilton-Baird’s website here and speak to their funding experts.
Invoice finance can quickly and easily free up your cash flow. Our preferred invoice finance broker, Hilton-Baird Financial Solutions, is ready to support you whenever needed.
The factoring company will agree the amount of cash advance they can provide you with. This is usually a percentage between 75% to 90% of your accounts receivable (but it can be 100% in some cases.) They will provide you with a full quote detailing the terms of the agreement and any fees that are applicable. Once you have signed your agreement, you should receive your funds within 24 hours.
At this stage, the factoring company will notify your customers as is relevant and specific to the agreement that they are collecting your company invoices. This will include details of how, by when and where to pay them. If you choose a confidential invoice finance service then this is not applicable.
When the invoices are paid, the factor company will send you the remaining outstanding balance of these less their fees. For example, you agree to £10,000 of invoices to go to the invoice factoring company. They provide you with a cash advance of 85% or £8,500 immediately. The remaining 15% or £1,500 less the discount charge and service fee, will be paid to you when your customer pays their invoice in full. You will resume direct invoicing and collection of your customers unless the invoice factoring agreement is extended or has a set fixed term yet to expire.
To save time and benefit from the knowledge of the experts in this field, speak to our preferred invoice finance broker, Hilton-Baird Financial Solutions, who will assess your needs and identify the best solutions to fit your business’s circumstances.
Invoice factoring can include some or all of the following fees:
To be eligible for invoice factoring, you will need:
There are three approaches you can choose to take or not if you are concerned about the non-payment of your invoices. This will form part of your invoice factoring agreement.
If you choose any of these options, then your invoice factor may decide to place a proportion of your funds in an escrow account. If payment is not made as expected, they can access these funds to cover their losses.
Managing credit risk is something your company should already be doing – after all why provide services and credit terms to someone who is unlikely to pay you? In addition, your invoice factor will also help to vet and assess your customers to help minimise those invoices that may not pay on time.
Invoice discounting is when the unpaid invoices of a business are used as security for a loan. Invoice discounting companies will issue cash upon issuance of the invoices and thereby releases cash flow immediately rather than having to wait for customers’ usual credit terms (such as 30 days, 60 days or longer in some cases). Invoice discounting specialists will usually only lend up to 80% of your total accounts receivable that is younger than 90 days old.
To use an invoice discounting service, you will need to send the discounting company an accounts repayable report. From this, they can decide how much they are willing to lend to your business against the value of your outstanding invoices.
Invoice discounting does not include the running of your sales ledger and chasing for payment. This remains the responsibility of your business.
If your company has already used your accounts receivable as collateral for another finance arrangement, then you cannot use invoice discounting services.
The costs for invoice discounting can include a fee as a percentage of your turnover, a service fee and an interest rate on the amount of the advance.
Businesses with a turnover of £250,000 or more may find it easier to obtain invoice discounting, however there are some firms who will consider all businesses of any turnover, including start-ups.
Invoice finance works well for any business that sells on credit terms to other businesses. It can therefore support a wide range of businesses, including fledgling and new businesses, as funding is linked to turnover and grows in line with sales. Speak to our preferred specialist invoice finance broker to gain insight into the options that would best meet your needs.
Invoice finance is a flexible form of funding that is between a finance firm and a business. The finance firm provides finance to the business who sells its accounts receivable. The released funds improve the business’ working capital. Invoice factoring is one type of invoice finance, with another being invoice discounting.
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