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Invoice Financing – How CBS Finance Can Help
Invoice financing is a method used by many businesses to short term fund slow payers. The most popular form of invoice financing is selling invoices to a factoring company that makes immediate payment to the business. Great for cash flow but obviously there is a cost involved for this service.
One of the main advantages of invoice finance services is that there is no loan required that may be secured on assets. The invoice is sold and usually 80% of the invoice amount is settled immediately by the invoice factoring company. The remaining 20% balance is paid when the client pays the invoice and the admin fee is taken out of the full amount at this stage.
Naturally before invoice funding can be put in place the invoices need to be verified by the factoring company. This means establishing that the invoices are due and there are no disputes as to why they should not be paid.
What are the advantages of invoice factoring?
Invoice finance is relatively straightforward to implement as there is no loan application being made. The company is effectively selling an asset to the invoice finance company rather than applying and raising a loan to fund working capital. Invoice finance can be much easier to achieve than a small business loan for example. Invoice factoring companies want to see that you ideally have regular invoices to credit worthy clients that they know will pay.
Invoice factoring and financing applications are available to small businesses as well as start ups in some instances and the qualification process is usually very fast and efficient.
Invoice finance allows you to concentrate on your business without the stress of chasing debtors on an ongoing basis. Delivering your service or products and leaving the accounts element to a professional THIRD party who has your best interests at heart.
Invoice finance allows you to take full control of your cash flow which in turn means you can accurately forecast stock requirements and potential expansion plans.
CBS Finance has helped countless businesses to source invoice finance companies and have a number of companies that can assess your exact requirements and offer a solution.
Invoice Financing – Things to Consider
You will need to consider a few things before making the decision to take the invoice finance route. Do you want to put all of your invoices through an invoice finance company or just selective ones? Also you need to consider credit control. Some invoice finance companies also want to take control of your credit control and you will need to consider long term customer relationships before agreeing to this.
CBS Finance have significant experience here and can help guide you towards the ideal solution.
Q. What is invoice financing?
A. Invoice finance is selling accounts receivables – in this case invoices, to a third party for a percentage of their value.
Q. How does invoice financing work?
A. Invoice financing is a great aid to cash flow for companies growing but who may suffer from slow customer payments. By selling the invoice value less an agreed amount the company receives payment whist the invoice factoring company wait for the invoice payment.
Q. What are the benefits of invoice finance?
A. Benefits of invoice financing include speed of payment as well as offering an alternative credit line to loans or overdrafts.
Q. Is invoice finance expensive?
A. As invoice finance is currently unregulated in the UK care has to be taken when choosing a partner. Service charges are usually between 0.75% and 2.5% dependent on company turnover. Discount charges are applied to money that is drawn down and averages between 1% and 3% typically.
Q. Is invoice financing good for a small business?
A. Invoice financing or factoring suits many small businesses who have not yet established a strong trading record and credit rating.
Q. Who chases the invoice payments?
A. The factoring company are wholly responsible for chasing invoice payments from your customers. They will typically credit check your clients to assess risk involved.
Q. Is invoice financing the same as invoice discounting?
A. No, these services are slightly different. Factoring allows you to get paid much quicker by the factoring company but with invoice discounting you are still responsible for chasing up payments from your clients.
Glossary of Terms
Invoice Finance Information Form