Invoice finance is a type of finance product that allows businesses to leverage the value of their unpaid invoices. Lenders will provide funding to cover the period, acting as a cash injection when your company needs it most. Once you receive payment for the invoice, the lender recoups their investment.
So, basically, your unpaid invoice acts as security for your loan. Lenders are often able to provide invoice finance on a short-term basis with a quick turnaround, so you can access the funds you need to pay necessary operational activities, such as paying staff wages and meeting your own supplier demands.
Ready to apply for invoice finance for your accounting firm and start easing the pressure of cash flow issues today? Speak to Rangewell's team of advisors today. We're independent of the lenders, so we can scour the whole of market to find the best invoice finance facility to suit your needs.
Get in touch with Rangewell or keep reading to learn more about how invoice finance can help relieve the pressure by leveraging the value of outstanding invoices.
How does invoice finance for accountants work?
Invoice finance is a common funding option for professional services firms, including accountants. Any B2B company will know the frustration of outstanding invoices and the impact they can have on daily cash flow.
So, how does invoice finance work, and how can it help your business? Typically, you will submit an invoice to a client and then a lender will provide a percentage of the value of that invoice as a loan - usually, loans can be between 75-85% of the outstanding invoice amount. You can receive this amount within 48 hours, sometimes even 24 hours.
Then, when the client pays the invoice, the payment is submitted into a trust controlled by the lender. This does not impact the client's payment experience, it simply appears to them that they are paying you direct as usual.
Upon repaying the loan, the lender deducts the interest and any fees, and the client will never know you employed invoice finance at this time.
Invoice finance is typically a short-term solution to help ease the pressures of outstanding invoices and boost cash flow so you can meet your own payment demands. This type of funding is secured against the invoice and does not require any asset security, such as property, so it can be a great short-term option for professional services firms. In addition, company owners and directors do not have to provide a personal guarantee, which is often the case for unsecured loans.
If invoice finance sounds like the funding product for you, then get in touch with Rangewell today and we'll help you to find the finance provider to meet your needs.
Types of invoice finance
Now you know how invoice finance typically works, let's take a closer look at the different types of invoice financing. Of course, when you come to Rangewell, you don't have to know exactly the type of finance that will work for you - that's where we come in.
We'll assess your circumstances, including the challenges you're currently facing and how business funding can support you to keep going and meet your goals.
In the meantime, here is a rundown of the two most common types of invoice finance.
Invoice factoring occurs when the invoice finance provider takes over the responsibility of the invoice and provides an advance against the invoice. With this type of invoice finance, the lender is able to chase the client direct, which saves you time and resources when it comes to outstanding invoices. The client is aware that the invoice is no longer in your sales ledger.
In addition, they may also offer Bad Debt Protection, which means that even if the client goes into administration or is unable to pay for other reasons, you will still receive payment.
You must have a minimum turnover of £25,000 to qualify for invoice refactoring.
For larger companies that already have credit control facilities in place, invoice discounting is often the preferred method as it allows you to maintain oversight and control over all aspects of the payment process. This way, you can decide whether you tell your client about the invoice finance or not.
Minimum turnover of £100,000 is typically required for invoice discounting.
How accountants can apply for invoice finance
If you think invoice finance might be right for you, then it's time to speak to Rangewell about assembling an application and funding the lender to meet your needs.
When applying for invoice finance, you will need to:
- Be a B2B company that raises invoices for payment
- Meet a minimum turnover threshold, depending on the type of finance you apply for
- Provide proof of accounts, such as your balance sheet and any other relevant documentation
- Meet credit and affordability checks
There may be other requirements depending on the finance companies and payment terms available to you. In order to minimise stress and secure the funding as quickly as possible, work with Rangewell's team of experts to find the right invoice finance package for you.
Get invoice finance with Rangewell
Invoice finance can be transformative for accounting firms, especially if unpaid invoices are one of the biggest stressors on your cash flow. There are many invoice finance companies on the market lending cash to businesses using outstanding invoices as leverage. Knowing which lender is right for you, and how to get the best payment terms, is often the hardest part of the finance application process.
At Rangewell, we've worked with accountants and other professional services firms for several years to find and secure the finance they need to succeed. Invoice finance is just one funding facility that we can help you to secure. So, if you need a business loan and are considering invoice finance, get in touch with Rangewell's team of professional finance advisors today, and we'll get started on your application.