If you’ve been wondering “what is invoice financing?”, read on. Invoice financing allows you to boost your cash flow via unpaid invoices. There are two main forms of invoice financing available to you. These are invoice discounting and invoice factoring. Invoice discounting involves borrowing money against the unpaid invoice, then settling your debt after it is paid. With discounting, you retain the responsibility of chasing up the payment yourself. Discounting might be the right option for you if you don’t want the client to know you’ve worked with a third party, expect to trade with them in future, have a good relationship with them and the invoice isn’t actually overdue, you simply need to access cash early.
Make the right decision
If you have tried and failed to get your invoice paid to no avail, don’t think you will be selling services to the client again, don’t have the time or resources to pursue payment yourself or don’t mind the client finding out you have worked with a third-party, you may well wish to opt for factoring. With factoring, you sell your invoice to a financier who then chases up the payment themselves. Whichever option is right for you will largely depend on your circumstances and relationship with the client.
Get the funds you need
More and more companies from many different industries are now turning to invoice discounting and factoring when they need to unlock the value in their unpaid invoices. Once you have accessed money via invoices, you should be able to boost your cash flow, settle your own debts and take advantage of any investment opportunities that have been presented to you but can’t wait around forever. It could be wise to speak to three or four different finance companies to see what they have to offer before coming to a decision.