The Client
The client is a freight forwarder business that has traded as a limited company for the past seven years, with a healthy turnover of around £600,000 a year.
The Scenario
The client had consistent cash flow issues, driven by offering standard payment terms of 60 days to customers on invoices, in addition to occasional late payments. Meanwhile, the operating costs of the business, predominantly wages, needed to be paid weekly or monthly, creating a real cash flow mismatch.
The Solution
The client was initially presented with several business loan options we secured for them, though they wanted a greater degree of flexibility in their borrowing. We therefore searched the whole market for an invoice finance facility instead, which was the more suitable solution for their needs.
We secured a £100,000 invoice finance facility, allowing the client to be paid advances on outstanding invoices up to the facility limit over the coming year. The facility works by the lender deducting a set percentage as their fee once the invoice has been paid by the client’s customers. This solution significantly improves the client’s cash flow exactly when they need it, without being tied to rigid monthly repayment terms.
Summary
Invoice finance, sometimes called factoring, is designed to increase a company’s cash flow and fund growth. It is a relatively quick way to access business finance against a company’s outstanding invoices.
While personal and business credit may prevent access to business loans in some cases, invoice finance lenders focus more on the payment history of a business’s own customers. The facilities are generally unsecured options, requiring no security beyond the invoices themselves, while also removing the time-consuming task of chasing payments, since this becomes the lender’s responsibility.
Frequently Asked Questions
Is invoice finance secured against property?
No, invoice finance is generally unsecured, requiring no security beyond the invoices themselves.
This makes it a genuinely different route to funding compared with a secured loan, since no property or other business assets need to be put up as collateral.
How much does invoice finance typically cost?
The main cost is usually a discount fee, typically ranging from around 0.75% to 1.5% per month.
Some providers also charge a smaller service fee on top. Costs vary by lender and by the credit profile of the business and its customers, so it is worth comparing the whole market.
Does invoice finance require good personal credit?
Not necessarily – invoice finance lenders often focus more on the payment history of a business’s own customers.
This can make it accessible even where personal or business credit history would limit access to a standard business loan.
Who chases payment on the invoices under an invoice finance facility?
Typically the lender takes on this responsibility once the facility is in place.
This removes a time-consuming task from the business owner, freeing up time to focus on running the company rather than chasing customers for payment.
Commercial Finance Network is a whole-of-market FCA authorised commercial finance broker working with property investors, developers, and businesses across the UK and internationally. We work across the full specialist invoice finance panel and will tell you which lenders will engage with your deal, what facility size and terms to expect, and how to structure the application before anything is submitted.
Commercial Finance Network is directly authorised and regulated by the Financial Conduct Authority. Invoice finance and other unsecured business lending facilities are not regulated by the Financial Conduct Authority.
Call us on +44 1494 622 111 or email info@cfnuk.com to speak to a specialist directly.
Related Pages
- Invoice Finance – borrow against unpaid invoices to improve business cash flow
- Business Loans – flexible unsecured and secured lending for UK businesses
- Commercial Finance – whole-of-market funding for businesses and property investors
- Commercial Loan Calculator – estimate monthly costs and repayments on your commercial loan
