INVOICE FINANCE: TYPES AND BENEFITS

2007-03-08 10:33:40

( Financial )



Invoice finance is a type of financing wherein an invoice finance provider advances you money for the invoices that you have issued. It is a financing option useful for small businesses that are faced with cash flow problems. Banks or independent financial organizations offer invoice financing to small businesses.

Types of Invoice Finance

Factoring and invoice discounting are two types of invoice finance. Factoring allows invoice financer to take over the responsibility on handling the sales ledger and collection of invoices from clients. You will lose direct contact with clients. Invoice discounting, however, allows you to continue handling collection and sales ledger. Thus, you still have contact with your clients. It is type of invoice financing provided to established businesses.

Invoice discounting can either be a confidential or a disclosed arrangement. Your clients can either be informed or not informed on your company’s arrangement with the invoice financer. The strength of your balance sheet is the key to decide whether to provide you with a confidential or disclosed invoice discounting arrangement.

Benefits of Invoice Finance

Invoice finance helps you meet short term payments for suppliers without waiting for invoices from clients to fall due. It helps you bridge the gap of cash payments and remittance from clients and suppliers. This way it helps you fund business expansion and encourage more sales.

How to Qualify for Invoice Finance?

A business must have raised invoices of goods and services to qualify for invoice financing. Such goods and services must been delivered first prior to the issuance of invoices.

How Much Cash Advance Can Invoice Financing Provide?

Invoice financing can provide you an initial cash advance equal to seventy-five percent of your invoices. This rate can increase up to ninety percent basing on the credit worthiness of your clients.

Invoice financing can possibly provide savings on your operations particularly if invoice financer will took over the collection of your invoices. Small businesses can surely benefit from any savings incurred on their operations.


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