You probably know what invoice financing is. You know the numerous benefits it can provide a business and when to implement it. However, you still might be asking yourself, ‘How does invoice finance work’? Here’s a more in-depth look at invoice finance.
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How does it work?
In simple terms, invoice finance provides the opportunity to release cash immediately against any outstanding customer invoices. There’s no need to wait around 30, 60, or 90 days for customer payments to finally land in your business bank account. A third-party financier effectively purchases your invoices with a minimal fee attached, meaning you get paid straight away.
FAQs on invoice finance:
How long does it take to receive invoice financing?
There is no definitive answer as it is down to your current business situation. Added complexity can, understandably, slow down the process. With that said, if all paperwork is done correctly and sent fast, the invoice finance process can be done in just a matter of days.
How much money can be borrowed?
This is dependent on one aspect: the amount of money you have tied up currently in unpaid invoices. Whether it’s £5,000 or £500,000, it’s possible to gain a varying sum of money depending on what invoices you have left that need to be paid.
How much does it cost?
The cost is decided by your circumstances and lender. In terms of receiving finance on a single invoice, you will typically be charged a fee between 5% and 10% of the invoice value. So if the outstanding invoice was for £1,000, the lender would pay you £900 if their fee was 10%.
You can also expect to pay an initial setup fee when creating your account with a financier.
Will invoice finance impact my customer relationships?
No. When you work with a professional outlet, you effectively gain an extension to your business. Payments will be chased and collected utilising the same methods you currently implement, which means there’s no sudden change to how your customer relationships are managed.
In fact, your customers won’t even realise you’re using invoice finance, and you can still contact them as normal if required.
Can I use more than one provider?
No. It’s only possible to have a single invoice finance provider. As a result, it’s essential you make the right choice and go with a provider that offers everything from a dedicated account manager to a proven track record with credit control.
Am I eligible for invoice finance?
Eligibility for invoice finance is down to a number of factors. It’s important to understand these points before trying to secure funding, as brokers are likely to ask numerous questions to see if you – and your business – are a good fit.
The good news is that, due to this form of financing being secured against your invoices, lenders are typically open to working with any company that possesses a suitable sales ledger and can prove their products and/or services were fully delivered. An extensive, strong credit history is not a requirement. You also don’t need to be turning over a certain amount per annum.
However, invoice finance is not a suitable option in certain circumstances. This is the case if your business:
• Grants extended warranties
• It’s standard to issue sale or return contracts
• Stage payments are used to settle invoices
• Invoices are issued in advance
Who can I talk to about invoice finance?
Invoice finance is a popular funding solution – and it’s one that is understandably growing in prevalence. As such, there are various financial institutions that are ready to offer assistance in this area. However, there’s one outlet that stands alone in that regard: TSF Finance.
It’s something you would expect us to say, admittedly, but don’t just take our word for it. We’re an award-winning invoice finance business. We possess many years of experience helping various businesses across various industries. Simply put, if there’s anything to know about invoice finance, we know about it – and we’re happy to share this expertise with you.
You know how invoice financing works. You know who to speak to so you can learn more and obtain this funding solution. Now it’s time to set the wheels in motion and make the next move. Book a meeting today, and we can discuss the best invoice finance solutions to match your needs.