Invoice Finance

What is invoice finance?

Invoice finance is a financial tool that allows businesses to unlock the value of their outstanding invoices before customers have actually paid them. Essentially, it involves selling your unpaid invoices to a finance company or lender, who then advances you a significant portion of the invoice amount upfront—this can range from about 70% to 90% of the total value. When your customer eventually pays the invoice, you receive the remaining balance, minus the finance company’s fees for the service.

This method boosts your cash flow by providing immediate access to funds that would otherwise be tied up in the accounts receivable process for days or even months. It’s particularly useful for businesses looking to manage their cash flow more effectively, invest in growth opportunities, or cover operational expenses without waiting for customers to pay their bills. There are different types of invoice finance, including factoring, invoice discounting, and selective invoice finance, each with its own set of features tailored to various business needs and preferences.

Types Of Invoice Finance

Invoice Discounting

This method advances your business a portion of the cash tied up in your accounts receivable ledger. Once you issue invoices for your products or services, the discounting company lends your business an amount close to the total invoice value, just shaving off a little bit. When your customers pay up, you settle the loan along with a previously agreed fee.

Selective Invoice Finance

When you have specific invoices from customers that you’d rather not wait on for payment, a finance company steps in. They’ll usually give you around 70-90% of the invoice price. Once your customer pays the invoice in full, the finance provider pass on the remaining balance to you, minus their service fee.

Invoice Factoring

This lets you "sell" some of your unpaid invoices. Here's how it works: a factoring company gives you about 80-90% of the invoice value upfront. Once your customers settle their invoices by paying the factoring company the full amount, you'll receive the rest, minus the factoring company's fees.

Non-recourse Invoice Finance

Even more flexibility! It's a bit like picking and choosing your battles. When you have specific invoices from customers that you’d rather not wait on for payment, a finance company steps in. They’ll give you usually around 90-100% minus their fee upfront. Once your customer pays you directly, you repay the lender.

Is it right For You ?

Invoice finance is appropriate for companies in the following scenarios:

You have a significant gap between paying suppliers and receiving payment

You ideally invoice clients on completion of the work

Clients pay you in 30-120 days payment terms

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Risecap Ltd Data Protection Number ZA553906. The registered address is 3rd Floor, 86-90 Paul Street, London EC2A 4NE. Risecap is a credit broker and not a lender.

Risecap helps businesses access business finance, working directly with businesses and their trusted advisors. Risecap typically receives a commission or finder’s fee from lenders which will be clearly outlined. The amount of commission received may vary depending on the product or lender chosen.