What is Invoice Finance?

Invoice Finance is a type of business finance where a business raises finance against its unpaid invoices, i.e. the business’s debtor book. This is only suitable for businesses that trade with other businesses, where credit terms are provided. There are two main types of invoice finance:

The finance provider takes security over the debtor book using a debenture and advances up to 95% of the outstanding invoices, providing the business with cash flow to trade. Funding can be available as quickly as within 24 hours of raising the invoice, allowing you to receive funds in advance of your client making payment.

The total funding provided is based on specific criteria set out by the funder and allows businesses to access finance for cashflow or investment purposes using an all too often unused asset on your company’s balance sheet.

Invoice Finance Costs

Invoice Finance costs vary from business to business but are broadly split into the following categories:

Arrangement Fee / Survey Cost

Some lenders will charge a fee to carry out due diligence, known as a survey and there may also be an arrangement fee, which is the cost of setting up the facility. Some will also charge a small annual renewal fee thereafter.

Service Fee

The Invoice Discounting Costs include a service fee for the day to day administration of the facility, usually charged as a percentage of the gross invoice value but sometimes this can be a pre-agreed fixed monthly amount. When this is charged as a percentage, there is often a minimum monthly charge agreed at the outset.

Discount Fee

This is calculated as a percentage of the total funds you borrow.

Ancillary costs

Some invoice finance companies will charge additional ancillary fees, which can include CHAPS payment charges for when you need to draw down funds on the same day.

Contact us to speak to one of our experts and find out if Invoice Finance is the right solution for your business and for tailored quotes.

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