How to Draw Money against Your Unpaid Invoices?

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Invoice financing involves selling your unpaid
invoices to a third party company for a fee. In
return, they will allow you to draw funds against
the money owed to your business.
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There are two main types of invoice financing
factoring and discounting.
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INVOICE FACTORING
Invoice factoring involves handing your invoices
over to an invoice financier, who will manage
your sales ledger and collect money from
customers on your behalf. When you raise an
invoice, the invoice financier will purchase the
debt owed to you by your customer, making a
percentage of the cost (usually 85) available
to you upfront. The invoice financier then
collects the full amount directly from your
customer, making the remaining balance available
to you. You will then have to pay the invoice
financier interest and fees.
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Ian Hepworth, Funding Solutio
Funding Solutions UK _at_fundingsol Benefits of
Invoice Discounting to Businesses
IN VOICE DISCOUN T IN G
Invoice discounting is similar to invoice
factoring in that it enables you to sell your
invoices to an invoice financier, who will lend
you money against your unpaid invoices. However,
in this instance, the invoice financier will not
manage your sales ledger or collect debts on your
behalf. When your customers pay their outstanding
invoices, you will hand the money over to your
invoice financier, reducing the amount you owe.
Funding Solutions UK _at_fundingsol In July we
structured facilities for a well known
Funding Solutions UK _at_fundingsol Advantages of
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T HE PROS AN D CON S OF IN VOICE FIN AN CE
Invoice financing can provide your cash flow with
a significant boost, which can be valuable if
your business is lacking in working capital.
However, the cost of using an invoice financier
means that you will incur a reduction in your
profit margin on each order or service you
fulfil. Furthermore, your chosen invoice
financier may restrict funding against poor
quality debtors, which means that you will need
to find a way to manage funding fluctuations.
Funding Solutions UK Rating
ME E T IN G T HE CRIT E RIA FOR IN VOICE FIN
AN CE
Funding Solutions UK scored an average of 4.5 /
5. Based on 12 customer testimonials.
Invoice finance requirements vary, so you will
need to ensure your business meets a stringent
set of requirements before you rush off to find
an invoice financier.

• Your business may be suitable for invoice finance
  if it has
• A good spread of customers you may encounter
  funding restrictions if a single customer
  accounts for more one-third of your turnover
• Simple, non-contractual debts
• Low levels of debt more than three months overdue
• Your business may be unsuitable for invoice
  financing if it
• Sells products or services to the public
  invoice finance is only available for business
  that trade with commercial customers

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• Countless, small invoices
• Complex, contractual debts
• If your company exports goods, you may be able to
  benefit from a special type of invoice financing
  export financing. When you use export
  financing, your chosen invoice financier will
  work with a partner abroad, who will be
  responsible for collecting payments from
  customers in the country to which you export.
• Calculating the cost of invoice financing
• If you are looking to use invoice financing, you
  should compare the interest charges, management
  fees and additional costs associated with each
  service provider. You should also consider the
  notice period for ending the service most
  financiers require at least three months notice,
  but some have notice periods of up to 12 months.
• Interest charges
• Interest charges on invoice financing agreements
  work in the same way as bank interest. Most
  invoice financiers calculate charges daily and
  apply them monthly.
• Management fees
• Management and administration fees for invoice
  financing will depend on several factors,
  including your turnover, invoice volume and the
  number of customers on your books. Factoring fees
  typically range from 0.75 to 2.5 of your
  turnover, while those for discounting range from
  0.2 to 0.5 of your turnover.
• Credit protection charges

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Posted on June 13, 2014 by Ian Hepworth by Ian
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