Invoice Finance provides a business with working capital by freeing up cash tied up in unpaid customers invoices. It’s a great way for a business to maximise cash flow – it enables business owners to manage the working capital more effectively and scale the business. Invoice Finance is a flexible and cost effective funding option for growing companies.
Does Invoice Finance suit my business?
If your business sells goods or services to other trade customers on credit terms, and invoices in arrears, then Invoice Finance could be a perfect way for your business to maximise working capital. Invoice Finance is an umbrella term and is also known as debtor finance, receivables finance and sales ledger finance. There are a variety of Invoice Finance products available and Confidential Invoice Discounting is the most popular Invoice Finance product in Ireland.
How does Invoice Finance work?
Invoice Finance works very simply. You raise an invoice to your customer and provide details of the invoice to the funder. The funder advances between 80% – 90% of the invoice value to you within 24 hours. When your customer pays the invoice, you get the remaining value of the invoice (10% – 20%) less agreed charges.
What are the benefits?
- An instant cash boost. Invoice Finance gives your business the benefit of immediate cash.
- Flexible. Invoice Finance is far more flexible than a traditional overdraft as the funding limit grows in line with your sales ledger. This gives you the confidence to put your growth plans into action.
- Better cashflow management. With a smoother cash flow, you can focus on running your business more efficiently.
- It’s cost-effective. You can use the cash to to negotiate better prices, discounts, and reduce bank charges .
- Improve credit limits. By paying your suppliers promptly, they may offer you better credit terms.
How much does Invoice Finance cost?
There are two main costs associated with Invoice Finance – an annual administration fee and a discount charge, which is similar to an interest rate levied on the funds in use. If Bad Debt Protection is included (non-recourse), there is an additional charge. The costs can vary widely, depending on the funder and facility you choose. We can explain all the fees and charges to you, to make sure you are fully aware of all the costs involved.
Which Invoice finance solution is right for my business?
>Invoice Discounting – the funder simply advances cash against invoices, you maintain the credit control inhouse. The customers are usually unaware of the funding arrangement – this is called Confidential Invoice Discounting.
>Factoring– the funder advances cash against invoices and manages the sales ledger function on behalf of the company, undertaking the credit control function. This facility is usually disclosed to customer.
>Selective Invoice Finance – the funder advances cash against selective debtors – the debtor must be credit worthy and the invoice is verified by the debtor before cash is advanced to you. The facility is disclosed to the customer. Based on single or selective debtors.
>Spot Discounting/Invoice Trading – the funder advances cash against single invoices on an ad-hoc or ongoing basis. The debtor should be credit worthy and the invoice is usually verified before cash is advanced to you. The facility is disclosed to the customer.
There are extra options with Invoice Finance, such as Bad Debt Protection (non-recourse) and this flexible product also forms an integral part of more complex solutions such as Stock Finance, Purchase Order Finance and Asset Based Lending.
With such a wide range of funding options to choose from, you want to be sure you’re making the best decision for your business from the outset. Making the wrong decision and choosing the wrong product or funder could be an expensive mistake. With our 20 years experience, we have the expertise to help you make the right decision. When you call Clancy Business Finance, we will explain all of the options available to your business and we’ll help you decide which Invoice Finance solution will best work for you.