Invoice Finance refers to a number of financial products within a wider portfolio known broadly as Asset Based Lending, or “ABL”.
ABL has grown rapidly in recent years as a replacement for more traditional types of bank lending, such as overdrafts, as banks have steered away from lending to SMEs. In fact, a traditional bank overdraft would likely have been based on a much lower multiple of your sales ledger, but with ABL typically your lender will take the time to properly understand your assets and therefore maximise the funding available to you.
Within ABL, Invoice Finance is by far the most widespread type of funding and allows lenders to advance up to 95% of your outstanding invoices to you before your customers have paid you, with the balance (less fees) being made available to you once they have paid. When you draw down the funding is controlled by you and in most cases funds are made available to you on the same day as you make a sale and raise an invoice to your customer.
Invoice Finance is split into two main products:
Factoring, which is a disclosed facility and in which your funder handles collections activity for you, including statements and credit control.
Invoice Discounting, which is confidential and in which your funder solely advances funds to you while you handle collections activity. With both products, bad debt protection is available to you for an additional fee.
The broader range of ABL options may include cash-flow loans, inventory (stock) finance, plant & machinery and property lending.At AssetInvoice, with over 20 years of experience funding SMEs, we have a comprehensive understanding of these products and can advise you which is the best fit for your business.