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Invoice Finance Explained

Invoice finance is where a third party, either independent like Alliance Commercial Finance or part of a bank or financial institution, agrees to buy your unpaid invoices for a fee. There are 2 types of invoice financing in the UK, Factoring and Invoice Discounting.


Factoring is the most commonly used form of invoice finance. Factoring is a form of cash flow finance that often exceeds the amount available offered through traditional bank funding.


Factoring allows you immediate access to cash tied up in your unpaid invoices, which could be as much as 90% against the gross value of each invoice outstanding. This means you don’t have to wait 30, 60 or even 90 days for your customers to pay and it helps provide you with the cash flow to pay suppliers, wages etc.


The factoring company will take over your sales ledger management, providing a credit control and payment collections service, leaving you with more time to concentrate on your business.



Confidential invoice discounting is the second most used form of invoice finance in the UK. Confidential invoice discounting helps thousands of businesses across the UK turn unpaid invoices into cash.


Confidential invoice discounting allows your company to retain it’s credit control function, for example; you will still be sending out your own statements and carrying out your own credit management, a particular advantage if you wish the facility to remain truly confidential.


Invoice discounting is simple; you will assign a copy of the invoices to the provider, which will be as simple as a copy of your day book listing off your accounting software. This is then processed by the invoice finance company and your invoice are made available for you to draw down up to 90 % of their gross value.

Added: 17 Nov 2015 12:13

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