Invoice factoring could be the right form of invoice finance for you if you don’t mind your client knowing you’ve worked with a third party financier, you don’t think you will be trading with the company that owes you money again or you don’t have the time or resources needed to chase the money up yourself. In invoice financing, you sell your invoice to a third-party who then pursues payment on your behalf. You’ll usually get to keep between 85-90% of the money owed to you once the financier takes their cut, though you may have to pay slightly more for factoring as you’ll essentially be using an outsourced collections department.
Could discounting be a better solution?
If you have a good relationship with your client, the invoice isn’t late, but you need the money early or you don’t want the client to know you’ve used an outside company, discounting may be for you. With invoice discounting, you borrow money against your invoice and then settle your debt once the invoice has been paid. Which option is right for you will largely depend on your circumstances and your relationship with the client.
A host of benefits
Any reputable finance company will talk to you in depth about your options so you can come to an informed decision. It may be best to talk to three or four different companies about what they have to offer before you decide which one to work with. Companies from many different industries are now using invoice finance companies when they need access to funds within as little as 24-48 hours. Most companies are more likely to settle overdue invoices once a third party gets involved. Invoice finance can help you boost your cash flow, take advantage of business opportunities that can’t wait around and enable you settle your own debts.