What is invoice finance?
Invoice finance lets your business borrow money against pending customer invoices. The lender advances a percentage of the value of the invoices, sometimes within just 24 hours, and charges a service fee and interest.
There are few types of invoice financing. Each releases cash from invoices, but they operate slightly differently. The most common types are:
- Invoice factoring: The factoring company takes control of the sales ledger operations of your business, as a package of services.
- Invoice discounting: Similar to factoring, but the sales ledger and credit control stays with your business. Your customers won’t be aware of the agreement.
- Selective invoice finance: Also called spot factoring, this option lets you choose which invoice or customer account you want to finance.
You can use a specialist invoice financing company, bank or other financial institution for invoice finance, or a broker. There are also marketplace fintechs where you sell your invoices to investors via an online platform.
» MORE: A guide to invoice financing