What are the Benefits of Invoice Finance?

Invoice finance is a popular finance facility for business owners with the flexibility to access funding as and when they need it and with funding secured against outstanding invoices that are due to be paid, invoice finance comes with a large set of benefits.

Invoice finance in simple terms is when finance is secured against your outstanding invoices and an invoice finance lender will loan up to 90% of your invoice almost immediately.

If you have invoice terms of 30, 60, 90 or even 120 days, your business could find itself waiting a long time to be paid. Whilst you’re waiting to be paid, it doesn’t mean your outgoings can be paused.

This type of finance will mean that you can receive a percentage of your invoice’s value which can be used in the day to day spending of your business.

Paperwork with numbers and finances

Healthier cash flow

An injection of working capital can support your cashflow, allowing you to have working capital for unexpected bills, investment, growth and day to day bills.

Full confidentially or Support with Credit Control Service

Invoice finance can be fully confidential from your clients, they will be unaware that you’re using a finance facility.

Invoice discounting will allow you to stay in control of your sales ledgers and the business will be responsible for collecting and chasing unpaid invoices.

If you opt to go for an invoice factoring facility, the finance provider can be responsible for managing your sales ledger and credit control, therefore your clients are likely to be aware that you’re using invoice factoring. However, you will remove the stress of chasing outstanding payments and also frees up time for you or your accounts department to concentrate on other areas of the business.

Avoid late penalties and fees from Suppliers & don’t miss payroll

With a finance facility in place, that means you can pay your suppliers, employees and bills on time. As a result, avoid late penalties and fees and preserve your credit score in the green.

No Monthly Repayments

Invoice finance repayments work slightly differently as you won’t need to make monthly repayments like business loans, commercial mortgages and asset finance. Invoice finance works by:

  1. The invoice finance lender will lend you a percentage of your invoice
  2. You will have working capital to use whilst you wait for your customer to pay your invoice
  3. When the customer pays their invoice, you will then pay the lender the amount advanced along with any interest that has occurred.

If you choose to go for the Invoice Factoring Finance option, a lender will be collecting on your behalf. Once they have received payment from your client, they will take away their deductions and transfer you the remaining.

Whilst if you choose to take out a business loan to support cash flow whilst you wait for invoices to be paid, you will need to start making monthly repayments straight away and continue to make sure that you pay your invoices on time, regardless of whether your customers have paid you or not.

Example of how Invoice Finance Works:

Below is an example of invoice discounting finance over a 35 day period, demonstrating how much invoice financing costs:

Invoice value: £10,000
Service fee: £80.00
Value advanced at 80%: £8,000
Cost of funding for 35 days: £32.55
Total cost of funding: £112.55
% cost of invoice value: 1.13%
Total Cost of Funding is Service Fee and Cost of Funding

How to work out the discount fee is as follows:
£10,000 invoice
80% of £10,000 = £8,000
£8,000 invoice
£8,000 * 4.25% (discount fee & Base rate added together) = 0.0425 = £340
£340/365 (days of the year) = £0.93p per day
For 35days 0.93p*35days = £32.55

A discount fee is only charged on what has been borrowed – if an invoice is uploaded and nothing has been drawn down against it then nothing can be charged. The only thing that will be charged is the service fee and in this case, that would be £80.

No Extensive Business Credit Search

A business credit search will still be conducted however, an extensive in-depth search on your business will be less likely. The lender will have more of an interest in the businesses that have outstanding invoices with you. As they will want to be confident that they will be able to pay their invoice to you to ensure that they get paid.

Invoice Finance grows with the business

As your business grows, the finance facility can grow alongside you. As funding is based on the invoices and the amount that you’re going to be paid, the funding facility can be increased.

If you have an existing invoice finance facility, we’ll complete a free review of your existing invoice facility and look to see if we can secure you a better rate or increase your term period.

Business assets aren’t used as a security

Invoicing finance is secured against unpaid invoices and the invoices will be used as security. Therefore, business assets such as property, machinery and equipment won’t be needed as security which is great for those businesses that may not have a lot of business assets.

What type of businesses can use invoice finance?

Invoice finance is available to any type of business – whether you’re looking for invoice finance for a small business or for a large enterprise, we work with lenders who specialise in different industries and business sizes.

Wholesalers, recruitment, consultancies and construction are the most common industries that use factoring and discounting invoice finance due to the nature of the business and the frequency and volume of invoices.

What if I already have an invoice finance facility?

If you already have an invoice finance facility, when was the last time that you reviewed your facility, does it still meet the needs of your business and how confident are you that you’re receiving the best rate?

We’re more than happy to review this on your behalf and see if we can secure you a better rate or a higher limit depending on your business requirements.

Contact Amplo Commercial Finance about Invoice Finance 

If you’re looking for an invoice finance facility, whether it’s factoring or discounting, get in touch with us for a no-obligation discussion. Call 01270 443510 or complete our contact us form and we’ll get in touch with you as soon as possible!


Amplo Group
11 Mallard Court, Mallard Way,
Crewe, Cheshire, CW1 6ZQ

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