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Unlock your business’s cash flow potential with invoice finance companies

14/06/2023

Maintaining a healthy cash flow is crucial for the success and growth of any company. However, many businesses face challenges when it comes to managing their finances effectively.

This is where invoice finance comes in as a powerful tool to unlock your business’s cash flow potential. In this article, we explore how invoice finance companies can provide supportive funding solutions for your business.

Choosing the right invoice finance company

When it comes to selecting an invoice finance company, it’s important to consider several key factors. Reputation, experience and their level of service should be at the top of your checklist.

Look for companies that have a proven track record in the industry and a strong reputation among their clients. Consider their expertise in your specific sector or industry to ensure they understand your unique financial needs. Additionally, tailored solutions that align with your business goals and objectives are crucial for a successful partnership.

Top invoice finance companies

Invoice finance companies come in different shapes and sizes.

Whereas some are specialist invoice finance providers, who live and breathe all things invoice finance, facilities can also be supplied by a large number of high street banks.

It’s important to remember that different invoice finance companies will specialise in different areas, whether that’s the type of facility they provide (for instance, factoring, invoice discounting or selective invoice finance facilities), or the type of business they support (for instance, their sector or size).

The key thing with your search is to identify the one which understands your business and can provide the facility which will add the most value.

Benefits of invoice finance companies

Working with invoice finance companies offers numerous benefits for businesses seeking to optimise their cash flow and improve financial stability. Here are some key advantages:

Improved cash flow

Invoice finance allows you to access up to 90% of your outstanding invoices’ value upfront, providing immediate working capital. This eliminates the waiting period for customer payments and enables you to invest in your business’s growth. Once the customer pays, the remainder is forwarded to you less the lender’s fees.

Reduced credit risk

Invoice finance companies can provide dedicated sales ledger management services through invoice factoring, bringing resource and expertise to this vital function. Non-recourse facilities, meanwhile, can also incorporate bad debt protection. This reduces the risk of bad debts, improves your cash flow predictability and gives you the time back to focus on growing your business.

Pay suppliers and invoices on time

By unlocking cash which would otherwise be tied up in unpaid invoices, the additional working capital enables invoice finance users to pay suppliers – potentially taking advantage of early settlement discounts – wages and other expenses on time. The improved cash position can also be used to invest in growth, expansion and new opportunities, or managing unexpected expenses.

Flexibility and scalability

Invoice finance solutions can be tailored to your business’s specific needs and can easily accommodate growth. Whether you need funding for a short-term project or ongoing support, invoice finance companies offer flexible solutions that scale in line with your business, given the funding you can access is directly linked to sales.

Success stories

To illustrate the positive impact that invoice finance companies can have on businesses, let’s explore a few recent success stories where our team introduced the most suitable facilities:

Rainbridge Timber: An invoice finance facility contributed to our client raising the £750,000 they required to support the organisational restructure of the business, which saw two of the five existing shareholders retire and sell their shareholding to the remaining shareholders, whilst supporting their day-to-day cash flow. Read more…

Harvey Jacob: An invoice finance facility was secured to provide our client, a recruitment company, with a more suitable and supportive finance facility that has allowed them to keep cash flowing and take advantage of new opportunities. Read more…

Anerley Windows: A selective invoice finance facility enabled our client to complete a contract in the required timescales. To do so, they required several contractors to be on site, and these contractors needed to be paid before the business itself received payment for the work, which would otherwise have created a cash flow gap. Read more…

These case studies demonstrate how invoice finance companies have empowered businesses to unlock their cash flow potential and achieve sustainable growth.

Frequently Asked Questions (FAQs)

What is invoice finance?

Invoice finance is a flexible funding solution that allows businesses to access the value of their outstanding invoices before customers’ payments are received. Instead of waiting for customers to pay their invoices, an invoice finance company advances up to 90% of the invoice value upfront, enabling businesses to access immediate working capital. Read more here…

How does invoice finance work?

The invoice finance process typically involves the following steps:

  1. A business provides goods/services to their customers and raises invoices
  2. An invoice finance company, known as the factor, verifies the invoices and advances a percentage of their value, typically up to 90%
  3. Either the client or the invoice finance company will take responsibility for credit control and ensuring customers pay in line with agreed terms, depending on whether the facility is a factoring or invoice discounting facility
  4. As customers pay the invoices, the invoice finance company releases the remaining balance (minus their fees) to the business

Is invoice finance suitable for small businesses?

Yes, invoice finance is suitable for businesses of all sizes, including small businesses. In fact, it can be particularly beneficial for smaller businesses that face cash flow challenges. Invoice finance allows them to bridge the gap between invoicing and receiving payment, providing immediate working capital to cover expenses, invest in growth and maintain financial stability.

How long does it take to set up an invoice finance facility?

The setup time for an invoice finance facility can vary depending on factors such as the complexity of the business, the chosen finance provider and the completeness of the required documentation. However, many invoice finance companies strive to provide a streamlined onboarding process. In some cases, businesses can access funding within a matter of days once the necessary paperwork is completed.

Do I need to finance all my invoices?

No, you have the flexibility to choose which invoices you want to finance. Invoice finance can be provided either on a full turnover or, alternatively, a selective basis, which allows businesses to finance specific invoices or a portion of their overall sales ledger. This means you can tailor the funding to your specific cash flow needs, depending on the invoices that require immediate funding.

Will my customers be aware of the invoice finance arrangement?

It depends on the type of invoice finance facility you choose. With confidential invoice finance facilities, your customers are not informed about the arrangement. The credit control and collection process provided through factoring facilities is handled by the finance provider, but the communication appears to be coming from your business. With disclosed facilities, your customers will be made aware that you are using a finance facility, and the finance provider may handle the collections on your behalf.

Will invoice finance affect my customer relationships?

Invoice finance is a common and widely accepted financing option. Most customers understand that businesses may use invoice finance to manage their cash flow. As long as the finance provider maintains a professional approach and handles collections respectfully, it is unlikely to negatively impact your customer relationships. In fact, timely payments resulting from invoice finance can help strengthen your relationships by ensuring smooth transactions and reliable service.

What are the fees associated with invoice finance?

Invoice finance fees vary depending on factors such as the chosen provider, the funding facility structure, the creditworthiness of customers and the volume of invoices. Common fees include a discount charge (interest) on the advanced funds, a service fee for credit control and administration, and potentially a setup fee. It’s important to review and understand the fee structure before entering into an agreement with an invoice finance company. You can get an indicative quote using the tool below:

These FAQs aim to address common enquiries regarding invoice finance, providing businesses with a clearer understanding of the concept, its benefits and the practical aspects of implementing an invoice finance facility.

How to identify the ideal facility and invoice finance company

While it’s possible to approach invoice finance companies directly, it can be difficult and time-consuming to identify which ones represent the right fit for your business – and which can even provide what you require.

As a specialist invoice finance broker, we can guide you in your search by identifying the most suitable invoice finance providers and facilities for your specific requirements.

With a comprehensive panel and over 25 years’ experience, we have a proven track record of helping our clients secure the funding that will enable them to reach their potential.

To discuss your requirements with our team, please call 0800 9774833 or request a call back. Alternatively, use our invoice finance calculator for an instant indication of the amount you could access with invoice finance, and get an indicative quote.

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Some of the funders we work with

  • Close Brothers Invoice Finance
  • Sonovate
  • Praetura Invoice Finance
  • Tradeplus24
  • Barclays
  • Roma Finance
  • PNC Business Credit
  • Partnership Invoice Finance
  • Blazehill Capital
  • Team Factors
  • 4Syte
  • Accelerated Payments
  • Aldermore Invoice Finance
  • Cynergy Business Finance
  • Metro Bank SME Finance
  • Nationwide Finance
  • eCapital Commercial Finance
  • Investec
  • Berkeley Trade Finance Ltd
  • Kriya
  • Davenham Trade Finance
  • Woodsford Tradebridge
  • MaxCap
  • Peak Cashflow
  • Clear Factor
  • Skipton Business Finance
  • Leumi ABL
  • Pulse Cashflow Finance
  • Ultimate Finance Group
  • Haydock Finance Ltd
  • Santander Corporate & Commercial
  • Giant
  • InvoCap
  • Optimum Finance
  • Davenham Asset Finance
  • Regency Factors
  • IGF Invoice Finance
  • Merchant Money
  • Royal Bank of Scotland
  • Castlebridge
  • ABN AMRO Commercial Finance
  • Lloyds Bank Commercial Finance
  • Time Finance

Authorised and regulated by the Financial Conduct Authority (FCA number 730445)
We are a credit broker and not a lender and offer credit facilities from a panel of lenders