Invoice Finance is a form of business lending where the Invoice Finance Provider purchases, at a discount, invoices issued by businesses on credit terms to their customers. It is also known as Supply Chain Finance, a collective term for various types of Invoice Finance, including: invoice discounting, selective invoice discounting, invoice factoring and spot factoring among others.
Lengthy payment terms and late payment of invoices is a common problem for many businesses which can cause an imbalance to cashflow.
Invoice Finance enables businesses to get paid earlier on invoices they have issued, and therefore improve cashflow.
1) The client raises an invoice with its customer for providing goods or services.
2) The client sends the invoice to the Invoice Finance Provider who agrees a price they are willing to pay for it.
3) The client agrees to the finance offer and the invoice finance provider funds the customer straight away.
4) The invoice finance provider is repaid by the client's customer directly in line with the terms of the invoice.
The primary benefit of Invoice Finance is the speed with which a business can release value within their debtor book which improving cashflow; this can be achieved quickly with funds being received within 24 hours of initial registration. The fast availability of low cost funds enables a business to solve any short term cashflow issues.
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