Almost every business depends on a steady flow of cash, that’s exactly what invoice finance provides.
What is invoice financing?
Invoice financing is a general term used to describe a range of asset-based finance facilities offered to businesses in need of cash. It gives you working capital so that you can run your business smoothly and efficiently. It also gives you the flexibility to make good buying decisions; negotiate discounts; and take advantage of opportunities.
What different types of invoice financing are there?
There are two forms of invoice finance; factoring and discounting.
While your business may be generating sales, optimising cash flow and keeping on top of late payments can distract your focus. Factoring is a finance solution that turns your unpaid invoices into working capital to help with day to day issues such as buying more stock or paying wages.
Why use invoice factoring finance?
It can give you up to 95% of the value of an invoice up front and allows you to fully outsource your sales ledger management and credit control, saving you time and money.
Simple to use, once you have raised the invoice, up to 95% of the invoiced value is paid to you and then the full amount is collected by the lender’s credit control team before giving you the balance, less an agreed fee.
Who is invoice factoring suitable for?
Factoring may be suitable for your company if you operate in the business-to-business sector, raise invoices and have a strong proof of debt.
Similar to factoring, invoice discounting allows you to receive up to 90% of the money you’re owed within 24 hours of submitting an invoice. The monies are advanced against the invoice without your customer knowing.
Why use invoice discounting finance?
Invoice discounting is an excellent way to give your business a vital cash injection. You’re effectively borrowing your own money – it’s just that you haven’t had that money paid to you yet.
Your funding grows with your turnover, the more you invoice the more cash becomes available. Different criteria apply for each product. But if your turnover is at least £50,000 and you sell to other businesses on credit terms, there’s an invoice finance solution available to you.
Who is invoice discounting suitable for?
Invoice discounting is mostly aimed at larger businesses (typically above £1m annual turnover). You must have well-established systems and procedures in credit control and sales ledger management.
Many businesses like the anonymity offered by invoice discounting so it may be a good option if you prefer discretion. With invoice discounting, your customers need never know that you’re using this facility. This is particularly important if you have good, solid, long-lasting relationships with your customers. Even when you have a full order book, you might still have to wait 60 or 90 days for payment, and persistent late payers can hamper your growth.
If your business is growing rapidly and becoming more international, your financing needs will increase and you will face new risks, in addition, you will need to finance your growth and manage these new risks.
At Coreco, we work with funders to provide assistance with importing; exporting; and making and receiving payments internationally. We can source a range of trade financing facilities to help you to finance your growth.
This will allow you to:
- Gain access to finance tailored to your trade pattern.
- Turn sales into cash more effectively. As sales grow, your finance needs will change.
- An improved cash flow may allow you to win further sales by offering more generous credit terms.
- Tailor your finance to manage the risks faced when trading internationally.
Whether you are new to international trade, or already trading internationally, we would be pleased to assist with your requirements.
Tax Bill funding
A consideration alongside invoice funding is tax bill funding; a short-term finance solution in case you find yourself hit with a hefty tax bill which you are unable to pay in one go.
This type of finance is most suitable for your personal, corporation or VAT bills. Available to spread the cost over 3 months (for VAT) or 6, 10 or 12 months (for Personal/Corporation tax), tax bill funding is unsecured and typically has no requirements for Personal Guarantees.
How can I get finance for my business?
With many different financing options available it’s always good to talk to an expert. As professional specialist mortgage brokers, Coreco Commercial are an award-winning firm with over 20 years experience helping clients with commercial finance enquires.
To discuss the various finance options available, please contact our Commercial Finance Division on 020 7220 5100 or click here for more contact options.