Invoice Financing

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Invoice financing is a way for businesses to borrow money against the amounts due from their customers.  This helps businesses increase cash flow, pay employees and suppliers, and reinvest in their operations and growth earlier than they would be able to if they had to wait until their customers paid their balances in full.

 

Businesses pay a percentage of the invoice amount to the lender as a fee for borrowing the money. Invoice financing can solve problems associated with customers taking a long time to pay and difficulties obtaining other types of business credit.  Invoice financing is also known as "accounts receivable financing" or simply "receivables financing."

 

Average Loan Amount

$5K-$5M

Loan Term

5-25 Years

Loan Term

5-25 Years

Average Loan Amount

Up to 100% of Invoice Value

Loan Term

Until Fully Paid

Factor Fee

Starting at 10%

Time Needed

Starting at 1 Day

How to Apply?

Invoice financing is a form of short-term borrowing that is extended by a lender to its business customers based on unpaid invoices. Through invoice factoring, a company sells its accounts receivable to improve its working capital, which would provide the business with immediate funds, rather than waiting, that can be used to pay for company expenses to increase growth and productivity.

 

When businesses sell goods or services to customers, they usually do so on credit. This means that the customer does not have to pay for the goods that it purchases immediately.  The purchasing company is given an invoice that has the total amount due with the bill's due date. However, offering credit to clients ties up funds that a business might otherwise use to invest or grow its operations. To finance slow-paying accounts receivable or to meet short-term liquidity, businesses may opt to finance their invoices.

If your business falls under this category, then you should seriously consider applying for invoice financing.

Documentation Needed:

  • Application

  • 3 Months of Business Bank Statements

  • Accounts Receivable Aging Report

  • Business Profit & Loss Statements

  • Business Balance Sheet

Qualifications:

  • $250,000 in annual revenue

  • 1+ Year in business

  • Unpaid Invoices

Invoice Financing

Invoice financing allows the company to meet its short-term liquidity needs based on the invoices generated which are still unpaid by its customers. Unpaid invoices are accounts receivable, which means that the company will receive that amount but not as soon as they would like.  If the company faces a liquidity crunch in that period, it has the option to go for invoice financing to meet its liquidity requirement. The company can then use the cash to pay its employees or suppliers, or invest in getting new machinery to expand their business. 

 

The benefit of invoice financing is that the company doesn't have to wait for accounts receivable to come and then to start paying business expenses.  They can do that as and when they get the money from the bank or lender.  The one important feature to understand in invoice financing is that if the company fails to make payment to the bank/lender, it can use the invoice as collateral. Invoice financing can be done in two distinct ways - one is factoring and the other one is discounting. 

Factoring is an arrangement in where a company approaches a financier or a bank to sell the unpaid invoice. The lender may pay up to 75 per cent of what the invoices are worth up-front to the company. If the lender receives full payment from customers, it will repay the balance amount less interest or other charges back to the company. 

Discounting is a method in which the company could get as much as 90 per cent of what the invoices are worth. The only difference betweenthe two is that the business collects the payment from customers and then pays it back to the lender. When clients makes the payment to the company, it then repays it back to the lender or the bank minus the fee or interest.

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