Invoice Finance
Invoice finance, also known as invoice discounting or invoice factoring, helps your business to bridge a working capital gap when providing goods and services to your customers. Access cash from unpaid customer invoices for upfront collateral that helps with your cash flow issues and improves credit control. Winchester invoice finance is a way to gain quick access to funds!
- Accelerate Cash Flow: Access necessary funds weeks or months before invoice payments are due.
- Flexible Options: Includes invoice factoring, discounting, and selective invoice finance.
- B2B Solution: Ideal for businesses invoicing other companies for goods or services.
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- Tailored Solutions for Your Unique Goals
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What is Invoice Finance?
Invoice finance allows businesses to use unpaid invoices as collateral for quick funding, typically providing access to 80 or 90 per cent of an invoice’s value within 24 hours. The amount advanced is based on the lender’s risk assessment, considering the business’s overall strength and its debtor book rather than short-term performance.
When a business enters into an invoice finance agreement, it can assign its outstanding invoices, and the business finance provider will release the remaining 10 to 20 per cent of the invoice amount, after deducting any applicable fees.
This method creates a revolving pool of funding that grows as new invoices are raised and paid, providing flexibility for cash flow management. Businesses incur a service fee and a discount charge similar to interest when using the funds.
Invoice finance is a valuable tool for your business to enhance cash flow, cover operational costs and support growth.
What about the
rates and fees?
Invoice finance rates and fees typically range from 1% to 5% of the invoice value. These charges, also known as the discount rate or factor rate, may vary based on the volume and value of invoices processed monthly. Businesses dealing with a small number of high-value invoices often receive more competitive rates compared to those handling numerous low-value invoices.
The cost of invoice finance depends on various factors, including your business type, customer creditworthiness, invoice volume, value, and the chosen invoice finance facility.
Additional fees such as service charges or standing charges may apply, ranging from 0.5% to 3% or more of your annual turnover. These fees cover administrative tasks related to your accounts, such as credit collection and management.
Example Breakdown:
- Invoice Value: £10,000
- Upfront Payment (95%): £9,500
- Final Payment (when customer settles): £200
- Total Fees at 3%: £300
In this scenario, your business would receive £9,500 upfront, representing 95% of the invoice value. The remaining balance of £200 would be paid to your business once the customer settles the invoice in full within 30 days.
The lender’s fee, based on a discount rate of 3%, amounts to £300. Therefore, your business would receive a total of £9,700 (£9,500 upfront + £200 final payment) from the original £10,000 raised invoice, with £300 deducted as fees.
"Exchange unpaid invoices for instant working capital."
The differential thing between invoice factoring and invoice discounting is that factoring includes the lender providing credit control services effectively managing the whole of the business’s debtor book. Invoice discounting companies let the business maintain their sales ledger keeping the facility confidential from customers. Both factoring and discounting invoice finance are examples of asset-based lending that exchange unpaid invoices for the instant working capital.
Advantages of Invoice Finance for Your Business
Using invoice finance, similar to other funding alternatives, has its specific advantages:
Maximising Assets:Â By using unpaid invoices as collateral for financing, your company can capitalise on an asset on its balance sheet allowing you to leverage existing resources effectively.
Flexibility: Invoice finance offers flexibility in spending, allowing small businesses to use funds for inventory, staffing or other activities. The financing grows with sales, aligning with cash flow needs, provided customer payment terms are met and reliability is maintained.
Asset Protection: Outstanding invoices act as the primary collateral for the business, which typically reduces the dependence on alternative securities, thereby safeguarding your assets.Â
Scalability: As your business revenue increases, you become eligible for greater funding opportunities, which allows you to consistently improve your cash flow.
"We have helped so many different types of businesses achieve their goals. It doesn't matter if you own a gym, restaurant, florist, hotel, or E-commerce website, you name it we've helped them find the capital they needed to expand. Few businesses aren't considered for this type of funding"
Callum Scott – Winchester Corporate Finance
Protecting your business with
Recourse and Non-Recourse Financing
There is another layer to invoice financing which is recourse and non-recourse invoice financing.Â
Recourse invoice financing means that your business would get no bad debt protection. If a debtor pays too late or fails to pay the invoice your business would be liable to repay the full invoice advance value, including fees. Recourse factoring has an increased risk because, within the terms and agreements, your business will be required to buy back any unpaid bills.
Non-recourse invoice financing simply means that your business will be given protection against bad or late debt. With this form the increased risk lies with the lender and your business has been safeguarded from the bad debt risk from customers.
What are the advantages?
Invoice finance provides many advantages for a business. It offers a fast and flexible way to manage cash flow enabling you to take on more client work without overstretching working capital. Bridge the gap between paying your suppliers and receiving money from customers alleviating cash flow issues with invoice finance. You will typically expect to receive up to 95% of the invoice value and have very quick access to cash. Usually within 24 hours after receiving the invoices the lender will release the funds. Depending on the type of invoice finance facility you can choose to sell one or multiple invoices as well as decide whether you or your finance provider will manage the credit control process. Making your sales ledger fully accessible to the lender can free up your valuable time from chasing invoices to focusing on what matters to you. However, there is a confidential service available if you would prefer to continue to manage your customer and sales ledger as normal.
And Disadvantages?
As with any financial product, there are disadvantages. Invoice financing is designed for specific businesses. It is only suitable if you provide goods or services to other businesses (B2B), as opposed to the general public (B2C). Your customers may be aware that you are using a facility if you choose to let the lenders manage your sales ledger, which in turn could potentially harm your customer relationships.
Will I qualify?
There are requirements to qualify for invoice financing. The business must trade predominantly by invoicing other businesses for products and services. The business must be UK registered and have a turnover of at least £100,000 and have been trading for a minimum of 4 months. Limited, partnership and sole traders are accepted.Â
Invoice Finance
Rates and Fees
When considering factoring services, businesses should be aware of the fees typically charged on the total invoiced amount, which can range from 0.2% to 1.5%. Fees may vary based on the industry.
Invoice finance can be a valuable resource for businesses, but it is crucial to fully understand the associated pricing and charges before committing to a service. We aim to provide you with a clear overview of the most common invoice finance charges enabling you to make an informed decision about whether this financing option is suitable for your business needs or if other finance products may be more suitable.
"We are experienced in arranging invoice finance solutions for SMEs."
The benefits of choosing Winchester Corporate Finance include us working with a panel of reputable invoice finance providers. We are experienced in arranging invoice finance solutions for SMEs. Our services are free and applying is quick and easy. We will guide you through the process and our team of knowledgeable finance professionals will answer all your questions on invoice finance facilities.
Industry-specific
finance
There are some industry-specific invoice finance facilities. Invoice finance is used by companies that invoice other businesses for their goods and services and certain industries rely on it heavily. Finance facility providers have developed tailor-made products to suit these industries.
Recruitment
Recruitment invoice finance is a valuable tool for recruitment agencies, enabling smooth cash flow management while awaiting invoice settlements from clients. As a recruitment business, you understand the importance of efficient office administration, including vital tasks like timesheet management.
By leveraging the flexible and confidential capabilities of invoice finance, you can ensure uninterrupted operations and focus on growing your recruitment business without financial distractions. With recruitment finance, you have the opportunity to unlock up to 100% of the cash tied up in your invoices, providing immediate access to funds.
The benefits of recruitment finance include no long-term contracts and a straightforward fee structure, making it a convenient and transparent solution for your business. Let Winchester Corporate Finance assist you in accessing the financial support you need to thrive in the competitive recruitment industry.
Creative Sectors
Web design agencies, advertising firms, design companies, and marketing agencies often face the challenge of late-paying clients, which can significantly impact their cash flow. This situation can make it difficult to pay staff or suppliers promptly, leading to operational difficulties such as covering printing costs or hosting fees. Balancing the need to produce quality work while also chasing client payments and maintaining positive client relationships can be a daunting task.
Invoice finance offers a solution to alleviate the pressure of tight cash flow for such businesses. By selling an invoice to an invoice finance lender, funds can be released within as little as 24 hours. Many design agencies opt for invoice finance services that include full ledger management. With this service, the lender takes control of the payment process, effectively assuming the role of chasing payments, while maintaining a highly professional relationship with the original customer.
Winchester Corporate Finance understands the unique challenges faced by web design agencies, advertising firms, design companies, and marketing agencies. We can help you explore invoice finance options tailored to your specific needs, enabling you to focus on delivering exceptional work and maintaining strong client relationships without being burdened by cash flow constraints.
Construction
The construction industry is particularly susceptible to delayed and unpaid invoices, which can have a significant impact on cash flow. Cash flow issues in the construction sector can disrupt the entire supply chain, affecting various firms operating within the industry. This domino effect can create financial challenges for businesses at every level.
Construction invoice finance plays a vital role in helping construction companies maintain working capital and overcome temporary shortfalls in cash flow. By leveraging invoice finance, construction businesses can access funds tied up in outstanding invoices, providing them with the necessary liquidity to keep their operations running smoothly and meet their financial obligations.
Winchester Corporate Finance understands the unique cash flow challenges faced by the construction industry. We can provide guidance and support in implementing construction invoice finance solutions tailored to your specific needs. Our aim is to help construction businesses effectively manage their cash flow, ensuring the stability and continuity of their operations within a demanding and dynamic industry.
Why Winchester Corporate Finance?
Our experienced, honest and transparent advisors with nearly a decade of experience, are ready to help your business with our range of business loans to buy new stock, invest in growth plans or just keep your cash flow smooth.
Funding options can be complex, but we aim to make the process simpler. Our goal is to help reduce your stress and worries with our core values:
Growth: Our sourcing process provides you with a clear picture of what your lending options are
Family First: Peace of mind that we will look after you and your business by building a trusting relationship through sharing knowledge and full process transparency.
Integrity: We will continue to search for funding until we find the most suitable finance option for your business.
With Winchester, you can count on a seamless and stress-free experience from start to finish. So why wait? Apply Today!
Frequently Asked Questions
Will I qualify for invoice financing?
To qualify for invoice financing, a business must be UK registered. Limited companies and partnerships are accepted.
Is there industry-specific financing available?
Specialised financing options are available for specific industries like manufacturing, technology, healthcare, and real estate, as lenders offer tailored loan products and funding solutions.
Do you work with SMEs?
We are experienced in arranging invoice finance solutions for SMEs. Our services are free and applying is quick and easy. We will guide you through the process and our team of knowledgeable finance professionals will answer all your questions on invoice finance facilities.
