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Invoice discounting and invoice factoring are both types of a wider form of commercial borrowing known as invoice financing. Invoice finance works by allowing a company access to the money tied up in unpaid invoices. This is an extremely flexible form of borrowing which can help reduce the problems which come from late paying clients and provide an element of certainty to a company’s cash flow position.
Once an invoice is sent out to a customer, the invoice finance lender makes an agreed percentage of this amount available to the company immediately. Once a client pays the invoice, the lender will take their fee from this, with the remainder being made available to the company as usual.
As the amount of money available to a company through an invoice discounting or factoring agreement is based upon the value of invoices being issued, this form of funding is extremely scalable and can grow as the company grows.
When it comes to invoice finance, there are two main broad types to choose from: invoice discounting and invoice factoring. While they both work on the same basic premise, there are some key differences between the two which you need to be aware of.
If you are considering a form of invoice finance for your limited company, taking advice from a business finance specialist can help ensure you secure the most appropriate form of funding at the very best price possible. At UKBF, we are experts in the commercial finance arena, and we make it our mission to scour the market to find the best deal for your company, allowing you to access funding which not only meets your immediate needs, but is also appropriate for your long-term objectives.
We work across a wide range of sectors throughout the UK, providing specialist advice to each sector.
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