Invoice Finance

Invoice Finance Explained

Businesses exist to provide customers with value in return for payment, which may be with the order, prior to delivery or several days or even weeks following delivery. In the latter case cashflow may become strained if these customer payments are delayed. Invoice finance or invoice factoring are working capital solutions for all types of B2B business, providing early access to monies owed, in return for a fee.

Business invoice finance can be split into two approaches. A confidential invoice discounting facility, also known as debtor finance or receivables financing, where a company borrows against its unpaid invoices, retains control of its sales ledger and is responsible for collecting its debts.

The other approach is invoice finance factoring, also known as accounts receivable factoring or debt factoring, where the company sell its entire debtor book or sales ledger to a 3^rd party provider (the factor) who collects the debts directly from customers. This is not a confidential process.

Invoice finance may also be provided with recourse or non-recourse. Recourse factoring means the business is liable to repay any advance, should the debt become unpaid. Non-recourse financing means the invoice finance company will accept liability for any unpaid debt. This would be underwritten by an insurance agreement with a 3^rd party credit provider such as Allianz Trade, Coface or Atradius.

Finally, while many invoice finance facilities are just that, a facility across the whole debtor book, many providers offer selective invoice finance, also known as spot invoice finance, to enable a business to fund one or a handful of invoices.

Invoice Finance for Small Business

Blueray Capital is an FCA regulated, invoice finance broker with established partnerships with invoice finance providers offering invoice discounting facilities and selective invoice finance. We source working capital solutions for clients across the country but especially in London, Oxford, Bristol, West Midlands, Manchester & Leeds. We work with established businesses providing whole of market access for confidential invoice discounting facilities, selective invoice finance and factoring.

Invoice Finance Provider Criteria

Invoice finance is available from £50k to £20m, although usually our clients are looking for invoice finance solutions in the £250k to £5m range. Once on-boarded with the invoice finance provider a company can expect to see advance rates from 50% to 90% of the invoice value, depending on sector and client concentration. Advances are rapid, within 24-48 hours.

Minimum eligibility requirements differ among invoice finance providers but typically the business should have been trading for at least two years, with annual sales of more than £100k and have multiple clients.

The invoice finance provider will be keen to assess the strength of the business itself and the profile of its debtor book regarding types of customers, their sectors and the level of concentration.

The maximum repayment term for businesses with an invoice finance facility, or one using selective invoice finance, is normally 90 days to 120 days. Fees paid reflect the size of the invoice finance facility provided, the strength of the business and the quality of the debtor book. The longer the time taken by the customer to pay the debt, the higher the cost to the business.

Fees and interest rates vary among invoice financing companies, so it makes sense to appoint an invoice finance broker to help source the best confidential invoice discounting facility or factoring services available.

To apply for an invoice finance facility or selective invoice finance can be a rapid process as many of the specialist invoice finance providers have automated, online portals which enable them to rapidly assess the strength of the applicant. Indicative offers can be available in hours, but the overall on-boarding process is likely to be 1-2 weeks.

Business Invoice Finance

Banks, invoice finance providers and invoice factoring companies have different information requirements but normally SMEs will need to provide full accounts, latest management accounts, bank statements, aged debtor and creditor reports and Director information. Invoice financing agreements are subject to external credit agency review, credit sanction, identity checks (KYC) and completed documentation. A charge is taken over the business and Director Personal Guarantees are often required.

A recent and growing requirement to secure business invoice finance is open banking and access to accounting systems. Open banking provides secure, read-only access to the SME invoice finance applicant’s bank account for a short period, once relevant credentials and permissions are provided. Providing access to accounting packages such as Sage, Xero & QuickBooks, among others, and visibility of the bank account enables invoice finance companies to rapidly assess the financial performance of the business and the strength of application. This is a trend that is likely to expand to cover most of the business invoice finance market.   

Apply for an Invoice Finance Facility

As a trusted invoice finance broker for SMEs, we provide Finance Directors with rapid access to the entire invoice finance market including banks and specialist invoice finance providers. This is at no additional cost to the business as our remuneration is provided by the invoice finance provider or invoice factoring company as a share of their fee.

To receive a prompt response with an indication of terms, submit a summary of your business with your invoice finance requirement by clicking on the Apply button below.