Cashflow finance lets you to access the funds tied up in your outstanding invoices without waiting for your debtors to pay.
The lender pays you a percentage of the amount owing on your unpaid accounts receivable. Once your debtors settle their accounts, you receive the remaining balance of the invoices, less the lender’s fees and charges.
What are the benefits?
Cashflow finance provides access to funds which would otherwise be unavailable for at least 30 days, giving you an immediate cash flow to cover operating expenses. Because it’s based on the invoices you issue, your access to finance will increase as your business grows.
Invoice factoring is a form of cashflow finance which is disclosed to your customers. The financier purchases your unpaid invoices and deals with your customers directly, taking responsibility for managing your accounts receivables ledger and debt collection. Invoice factoring is most suitable for small businesses who do not have their own established credit management systems.
Invoice discounting is a form of cashflow finance which is not disclosed to your customers. It is more like a short-term loan which is secured against your accounts receivable ledger. You retain responsibility for managing your accounts receivables ledger and debt collection. Invoice discounting is most suitable for larger businesses who have well-established inhouse credit management systems.