A great quick win where an injection of cash is much-needed, but not always the most cost-effective solution. For a fee, a factor typically pays 80-90% of an invoice to you upfront.
Two types of invoice finance
Invoice factoring and invoice discounting
Factoring and discounting both work on the basis of releasing funds that are held in your unpaid invoices. You effectively raise finance against debt owed to you.
What’s the difference?
It’s simply about who takes control of your sales ledger, and importantly the responsibility for collecting outstanding payments.
With Factoring, the finance provider takes the control and payments are made direct to them. Invoice discounting, however, allows you retain control as well as an element of confidentiality; your customers will not be aware that you have a third-party finance company involved because all payments and communications will be direct with you.
Either way, the value held in your invoices act as the debt security, so both are a viable short-term funding solution.
The benefits of invoice finance
- Funding is secured against invoices, no other assets are required
- Up to 90% of your invoice value could be released within 24 hours
- A quick fix for short-term cashflow problems
- The funding available increases with your turnover
- Factors can also be an excellent strategic resource
- Factoring and discounting services are often competitively priced
Points to consider
Invoice finance is the single saviour of many small businesses, but there are some questions to ask yourself:
- Are your customers reputable?
- How important is your reputation for financial stability?
- Is the finance an affordable solution?
- Can you see a long-term alternative?
The best invoice finance company for you
We have a panel of more than 44 different companies who will factor and/or discount invoices, as well as the knowledge and experience to get the best deal for you.
We will ask all the right questions on your behalf and select the three best companies to introduce you to, based on their quotations. We negotiate the terms downwards for your benefit and see the deal through to completion.
“We needed a confidential invoice discounting facility of £500,000 but the debt was project based and highly concentrated on one client. This was a no-go area for most providers but Pegasus arranged an agreement with a very understanding and flexible organisation that reacted very quickly to our needs.”