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Most asked questions about invoice finance

Invoice finance is an alternative type of business finance that is popular in the UK, however it’s still unknown to most people and businesses meaning there are questions surrounding it before considering it as an option to their business. Here are the most common questions when it comes to invoice finance and invoice factoring.


How does invoice factoring work?

Invoice factoring is a lot different from loans and overdrafts, its more straightforward. You provide the goods/services to your customer like you usually do and then raise an invoice. The invoice will then be sent to the customers with a copy that also goes to the finance company and the finance company will be the recipient of the funds. The finance provider will pay you up to 90% of the value of the invoice. When the customer pays the invoice to the finance company, the remaining value of the invoice will then be paid to you. This will eliminate the wait for most of the value of an invoice to be paid.

There are different types of invoice finance that will change the way the products work, so make sure you understand the products you are considering.


Why do businesses use invoice factoring?

Invoice factoring is a tool that is used for combating the cash flow problems with late paying invoices, which can be difficult for small businesses. Large amounts of money can be tied up in unpaid invoices and if you aren’t paid on time for a while, this can be challenging, a lack of cash flow can also be a barrier to expansion and growth.

The finance provider also handles credit control is one of the many benefits that attracts small businesses and start-ups because they don’t have to worry about investing in resources to handle it themselves when they are too busy trying to manage their business. With invoice factoring small business don’t need to have their accounts and employees spend time chasing invoices or hire other people to do it.


What is the difference between invoice finance and factoring?

Invoice finance is the broad term that covers all types of finance, like invoice factoring, invoice discounting, etc..

Added: 30 Aug 2019 09:38

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