How to apply for business invoice finance
Invoice finance, also known as business invoice financing, is a facility to help business owners leverage their unpaid invoices, giving them an instant cash injection. It enables business owners to release up to 90% of the invoice value.
On payment of the invoice by the business’ customer, the lender will release the final amount, minus any fees and charges.
An invoice loan for business is therefore an incredibly valuable commercial finance facility for businesses in sectors that are heavily reliant on invoicing, helping to reduce their reliance on timely payments from third parties and establishing a more regular cash flow.
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How do invoice loans for businesses work?
Business invoice financing differs from a traditional business loan because the facility leverages the business’s existing invoices into cash. In this sense, there is less risk for the lender associated with this type of transaction, because the money is essentially already entitled to your business. As such, the only real risk is if the third party in debt to your business is unable to repay the invoice.
After finding the ideal invoice finance provider, your business is expected to submit invoices to demonstrate the cash value of payments that are due. The invoice financing company will, based on these invoices, deliver a percentage of the invoice value up front, to support your business’s operating costs during the interim period.
Once your company has received the outstanding balance, you are expected to repay the remainder of the loan to the invoice finance provider.
Types of invoice financing
Invoice financing can be broadly categorised into two distinct types – invoice factoring and invoice discounting. As your trusted invoice finance brokers, Anglo Scottish can provide advice and guidance on which method best fits your business needs.
Invoice factoring services
Invoice factoring is a form of business invoice financing wherein the funder (sometimes referred to as the factor) purchases ownership of the invoices themselves, usually for a rate of 70-90% of the invoice’s value.
Your business’s customers are made aware of this situation and pay the factor directly.
Invoice factoring services are usually utilised by businesses that need quick access to working capital and cannot wait for customer payments. Industries such as manufacturing, transport, construction and more are often reliant on factoring.
Be aware, however, invoice factoring may come with an additional service fee payable to the factor for their efforts in collecting the invoice payment. This typically ranges between 1% and 5%.
Invoice discounting
Under an invoice discounting agreement, your business will receive a percentage of your outstanding invoices as an advance. However, you will retain control of your invoices and will remain responsible for collecting payment.
This service is typically used by larger businesses that want to keep their finances more discreet. Since ownership of the invoice is retained by your business, you can retain and build strong relationships with your customers.
You may still find that invoice discounting arrangements come with a fee, though these are usually smaller than the fees associated with invoice discounting. These will vary according to the size of the loan and customer payment terms, but generally range from 1% to 3% of the invoice value.
The benefits of business invoice financing
Quick access to cash
Invoice finance is a method for raising cash quickly for your business. It can be made available as soon as an invoice is issued and can be used to help grow your business.
No risk to assets
Invoice financing is an unsecured business loan in place of your invoices. You won’t have to offer up physical assets from your company as security.
Easy to forecast
While using an invoice finance facility, you can expect a steady influx of cash with the reduced risk of late payments or defaulted invoices.
It is important to remember that Invoice finance options are only available if your business is B2B – your customers will need to be other businesses, not the general public.
Decide
DECIDE
Decide on the asset you need to help your business grow
Talk
TALK
Talk to us, tell us about your business and the asset you wish to acquire.
Approval
APPROVAL
We will reach out to our panel of lenders on your behalf to gain approval.
Sign
SIGN
Sign your document, once approved we’ll send you your documents to sign. After which we will transfer payment to your asset supplier
Final checks
FINAL CHECKS
We’ll do a final check to make sure everything is running smoothly, and you can start reaping the benefits of your new asset.
Is invoice financing right for your business?
Whether or not invoice financing is right for your business will depend on a number of factors. An invoice loan for a business might be a good short-term option to help unlock capital from unpaid invoices. But, depending on how reliant your business is on invoicing, choosing a business overdraft facility or business credit card may be more helpful to bridge these finance gaps.
Choosing finance via one of Anglo’s approved invoice financing companies could make all the difference. Thanks to the wide range of funders within our extensive portfolio, we can offer a wider range of lending terms than many of the traditional banks.
This also means that your business may be deemed eligible for invoice financing with one of our funders, despite being deemed ineligible by the more restrictive lending criteria utilised by banks.
CASE STUDIES
Contact us
Still unsure whether business invoice financing is the best option for you and your company? Not to worry, Anglo Scottish can help.
Our team of experts is on hand to provide insight into your best option, provide more information about invoice financing in general or simply support with a no-obligation chat.
Contact us today to find out more. You can also reach us via phone on 0191 410 4776 or via email at enquiries@angloscottishfinance.co.uk.
Need help? Call us on 0191 410 4776