Invoice finance releases cash tied up in unpaid sales invoices. Rather than waiting out the full credit period, you receive a proportion of an invoice’s value from the funder shortly after you issue it, and the balance is released, less charges, once your customer pays. It funds a timing gap, not a loss.
It comes in two broad forms. With factoring, the funder also takes over collecting the debt, so your customers deal with them directly. With invoice discounting, you keep control of your own sales ledger and collections, and the arrangement can often be kept confidential. Discounting usually calls for a stronger, more established business with credit control the funder can rely on.
It suits businesses that invoice other businesses on credit terms and are growing faster than their cash allows — recruitment, haulage, manufacturing, contracting and similar. It does not fit trades paid at the point of sale, because there is no invoice to fund.
The costs and constraints matter. Expect service and discount charges, and sometimes minimum fees and notice periods. A facility can become embedded in how the business runs, so unwinding it later takes planning. Funders may assess your customers’ creditworthiness as well as your own, and where a facility is with recourse you carry the loss if a customer does not pay.
CW Asset Finance is a credit broker, not a lender. We are happy to talk through whether invoice finance suits what you are trying to do, and to approach funders on your behalf. Whether a facility is available at all, and on what terms, is the funder’s decision and depends on your circumstances.