![]() ![]() These types of arrangements are particularly well-suited to industries where long payment terms and late payments are the norm. With bank loans harder to come by, invoice financing allows businesses to unlock the cash tied up in their outstanding invoices without having to take on long-term debt. Invoice financing and factoring arrangements have become increasingly popular among businesses over the last few years. Is invoice financing a good idea for a business? However, there are some crucial differences in the way the deals are structured. What is the difference between invoice discounting and factoring?īoth invoices discounting and factoring are potential solutions to dealing with slow cash flow. That can help to maintain the good relationships you have with them. You also remain responsible for credit control and collecting the payment from your customers. Invoice discounting : Invoice discounting is more flexible as you can pick and choose which outstanding invoices you’d like to receive an advance on.The factoring company is responsible for collecting the payment from the customer when it is due. During that time, the factoring company provides an upfront payment to you every time an invoice is sent to a customer. Invoice factoring : In an invoice factoring arrangement, a factoring company takes control of a business’s sales ledger and credit control process for an ongoing basis over a fixed term, typically 12-24 months.Although they are similar in that they both release funds from unpaid invoices, there are some important differences between them. ![]() There are two main types of financing when it comes to invoices. You receive the remaining balance of the invoice minus the invoice provider’s fee.Customers pay the invoice they owe and you collect your payment as normal or after a provider handles the process for you (depending on the type of agreement you have in place).They pay you a cash advance worth an agreed percentage of the invoice’s value (this varies from provider to provider).You send a copy of the invoice to your invoice finance provider.You send an invoice to your customers as usual.Once you have an agreement with an invoice finance provider in place, you can raise money quickly and pick and choose which invoices you want to receive advances on. The key benefits of invoice financing are speed and flexibility. That means that rather than being strapped for cash while you wait for customers to make payments, you have the money to operate on a day-to-day basis and capitalise on opportunities when they come along. They will give you a cash advance, typically worth 75-90% of the invoice’s value, within as little as 48 hours (depending on your provider). Rather than having to wait for 30, 60, or even 90 days (depending on your terms) for a customer to make a payment, just send a copy of the invoice to your invoice financing provider. Simply put, invoice financing is the process of turning outstanding invoices that you have issued to your customers into cash. In this blog post, we’ll explain what invoice financing is, how it works, how much it costs, and if it may be a good fit for you and your business. For business owners who are experiencing cash flow problems, invoice financing could be the short-term finance solution you’ve been looking for. ![]()
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