Invoice factoring and invoice discounting both help ambitious companies expand and grow.
They refer to the same essential process: an asset-based working capital solution that allows businesses to get advances on cash they are due from customers, rather than waiting for those customers to pay. Businesses can then invest in growth.
Invoice discounting and factoring have become a major source of working capital finance since the restriction of bank financing, as a result of the credit crunch. Invoice finance is more attractive to a bank because it depends on the collateral of the invoice due from the debtor. New, post-credit crunch bank capital regulations have resulted in banks transitioning companies away from unsecured loans and overdrafts and on to this mode of lending.
- You provide the goods/services to your customer and invoice them
- You send the invoice details to the invoice finance provider
- Funds are made available of a certain percentage of the face value of the invoice. Usually within 48 hours (see different factoring companies for invoice advance % details)
- Either your own credit controller or the invoice finance provider’s sales ledger service carries out the invoice collection procedure
- When your debtor pays, the balance of the invoice is made available to you – less a service fee
Confidential invoice discounting is invoice financing that can be arranged confidentially, so that customers and suppliers are unaware that the business is being advanced capital against sales invoices before payment is received.
In the case of invoice discounting, many companies do not assess individual debtors of the business using invoice discounting, but protect themselves against the insolvency of debtors by relying on the business having a wide number of customers, and by demanding that only a certain percentage of a business’s sales ledger can be made up of a single customer.
Selective invoice discounting , like spot factoring , is where single receivables are sold to a third party. Factoring facilities are traditionally whole-turnover, whereby, the entire sales ledger of a company must flow through the factor.
Whole turnover invoice discounting is different to selective invoice discounting or spot factoring in that every invoice must be sold in a whole turnover facility, irrespective of need.
It’s quick and easy to access funds, which means you can get the cash flow you need to get on with business. With MarketFinance, you get:
- Fast funding: quick funding decisions and set-up
- Hassle free experience: easy to use digital interface
- Help in real-time: personal customer support
- Straightforward costs: no hidden fees
- What is working capital - a guide to working capital solutions
- What is purchase order financing?
- What is trade finance?
- What is import finance?
- Accounts receivables financing
- What is asset lending?
- What is asset finance?
- What is export finance?
- What is transport finance?
- What is recruitment finance?
- What is manufacturing finance?
- What is invoice finance?
- What is factoring?
- What is spot factoring?
- What is invoice trading?
- What is invoice discounting?
- What is selective invoice discounting?
- Factoring vs invoice discounting
- The advantages and disadvantages of debt factoring
- How to compare factoring companies
- Invoice finance vs overdrafts
- Invoice finance vs business credit cards
- What is a debenture?
- What is working capital?
- Peer to peer finance, crowdfunding and alternative business funding
- What is the peer-to-peer finance association?
- How to deal with late payment
- Top tips to improve cash flow
- The ultimate guide to accredited cbils lenders
- What is the coronavirus business interruption loan scheme (cbils) and should my business apply for a loan?