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Which type of Invoice Finance is right for you?

Published on 11th October 2018 - Last update on 7th July 2020

If you are ready to grow your small business or safeguard your cash flow, you might well be looking at Invoice Finance. With Invoice Finance, a funding provider will use your invoices as the security for cash advances. Instead of waiting for your customer to pay you, which can be a major headache if you deal with large corporations, it can mean getting paid as soon as you do the job and issue an invoice. It can avoid a cashflow crisis while you wait weeks or months for a large client to pay, and - by ensuring your cash always keeps pace with work going out - it can help ensure you always have the funds you need to support growth. 

But, at Rangewell, we know that there are many types of Invoice Finance, so which options might be right for you and your business?

Invoice Factoring - a turnkey solution for smaller companies

With Invoice Factoring, the invoice financier will take over your entire sales ledger and take care of collection from all your customers. It means outsourcing all the activities of credit control, freeing up your time for your core business.

So when you raise an invoice, the finance provider will buy the debt from you and pay you a  percentage - usually 85% - right away. They will then collect the full amount directly from the customer.

Once they have received the money they will send you the remaining balance less their interest and fees. Your customers will know your business is using an Invoice Finance service, but you will have the advantage of highly professional credit management, with collection and credit checking at no extra cost to your business.

“We had only been in business for six months when we started to face headaches from late paying customers. We were heading for a cashflow crisis, even though we had a full order book. So we turned over our sales ledger to an invoice factoring provider. Our cash flow problems were instantly over.”

Invoice Discounting - a confidential service for larger businesses

With Invoice Discounting, the invoice financier will simply lend your company money against your unpaid invoices. You can retain responsibility for collecting debts, or pass this on to the finance provider, who can manage the task confidentially so that your customers will not be aware they are dealing with a third party. Invoice Discounting works best for companies with larger business which can readily absorb the interest charges. It can, therefore, be ideal if you have an annual turnover above £500,000 with an established credit control system in place.

“We had been in business for a few years, but the more we grew, and the larger the customers we worked with, the worse the payment terms seemed to get. We realised we were funding their expansion plans when we wanted to get on with our own. We set up Invoice Discounting and the problem was solved.”

If your small business works to provide goods or services to large businesses, you could find your cash flow is threatened by late paying customers. Call us to see how Invoice Finance could provide answers, and which type of facility is right for you.

Selective Invoice Finance - a flexible solution

 Of course, whatever the size of your business, you might not want to put all of your invoices through a finance solution. Many relationships with customers may be totally amicable - although you may still face issues when a particularly large order from a lucrative but slow-paying customer comes in. Selective Invoice Finance, also known as Single Invoice Finance, lets you use only the invoices you select for funding - so that large invoice can go from being a serious liability into a valuable asset.

“One customer, in particular, was causing us a problem. They gave us big orders and they were not difficult about the costs, but the issue was payment. One month became two and then three. Obviously, we wanted to stay working with them. Our Selective Invoice Finance arrangement let us have the cash we needed.”

International Invoice Finance - helping you take your business further

Taking your business into overseas markets can mean new opportunities, but it can also mean new costs, with shipping, customs and insurance to deal with. It can also mean long delays if your goods have to reach customers on the other side of the world. International Invoice Finance specialists can provide finance when you invoice, as with other types of Invoice Funding, but can support their services with international teams, expertise and local contacts in most international markets.

“As first-time exporters, we were wary not just of the costs but of the risks of doing business internationally. Now we have an Invoice Finance solution which lets us take care of both.”

At Rangewell, we work closely with our clients to understand their needs before we recommend a particular type of finance. If you are thinking about an Invoice Finance solution, it makes sense to discuss your needs with our experts, especially as our service - and their expertise - is absolutely free.


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Richard Mitchell

Richard Mitchell

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