Invoice finance can help trading businesses to manage their cashflow by providing cash at the point of invoice in exchange for a percentage of the sum due. There are two main types of invoice finance:
- Invoice Factoring – With factoring a lender will look at the debtor book of a business and take a percentage of the qualifying invoices in return for making payment upfront and managing the credit control. This effectively means that the lender will issue and chase the invoices and then take payment on those invoices. Not all debtors to a business will be factorable and a lender will review the business and its debtors to ascertain the approach it will take.
- Invoice Discounting – Sometimes known as confidential invoice discounting, this approach is used with bigger companies that might not want their debtors to know that they are accessing invoice finance. With confidential invoice discounting a company will retain management of its own credit control and can exercise more flexibility with its terms. A lender will therefore want to ensure that the business has appropriate processes in place and, for this reason, invoice discounting is usually only available to larger businesses with a turnover of at least £500k.
It is worth noting that not all debtor books can be factored or discounted and that fees are negotiated by lenders on a case by case basis. As there is no tangible security, loans can be processed quickly – often within a week, and lenders pay an upfront fee to brokers plus a fee for every advance. This can provide a source of recurring revenue, which can help to strengthen your business.
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You don’t need to be a commercial specialist to benefit from the demand for commercial finance. By working with Brightstar you have access to our team of commercial experts and our comprehensive lender panel, which covers the full spectrum, from high street to challenger and specialist lenders, including those that are not available on a direct-to-broker basis.
If you would like to learn more about how you can work with Brightstar to help provide commercial finance solutions to your clients, call our team on 01277 508959 or click here to enquire.
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