Invoice Finance For The Food & Drink Industry
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What is invoice finance for companies in the food & drink industry?
Invoice finance is a financial product for businesses that allows money to be borrowed against the unpaid invoices that have been raised to customers.
It’s a form of ongoing credit that sees more money released each time a new invoice is raised, with the borrowing being repaid as older invoices are settled by customers.
Invoice finance facilities are usually arranged as longer-term borrowing that often remains in place for many years.
How does it work?
Invoice finance works as follows:
- Credit control – Either your funder or your business (depending on the type of facility chosen) chases the invoice.
- Further payment made – Once the invoice is paid by your customer, you receive the balance, minus your agreed cost of finance.
- Invoice issued – You send an invoice to your customer and also pass on a copy to your invoice finance provider.
- Advanced payment – Within 24 hours and up to 95% of the invoice amount.
Are there different types to consider?
Yes, there are three main types to consider. They are:
- Invoice discounting – Invoice discounting allows you to release funds from your sales ledger and retain the credit control function within your business. This leaves you in full control of your sales ledger whilst benefiting from improved cashflow.
- Invoice factoring – Invoice factoring allows you to release funds from your unpaid invoices, but differs from discounting as credit control function passes to your funder.
- Selective invoice finance – Selective invoice finance allows you to either pick and choose which invoices to finance, or even to just finance a single invoice.
What are the pros and cons of invoice finance for companies in this sector?
The key pros and cons are as follows:
Pros
- Financing your sales ledger allows you to improve your company’s cash flow on an ongoing basis, leaving you to focus on running your business.
- It’s a straightforward form of business finance that allows you to release funds based on your accounts receivables and the strength of your customers.
- For funded invoices, the factor will handle credit control on your behalf, making your collections process simple. Once the invoice is settled, the funds are released to your business, minus the fee due to the factor.
- Your company credit score is less important than would be the case when taking out a business loan. This means that you could still qualify even if you have poor credit, such as CCJs, defaults or missed payments.
Cons
- Although invoice financing can be a major benefit to cashflow in the food and drink industry, there is still a cost for using it. This will reduce your margins unless you use the facility to grow your business.
Will I be eligible?
If your business sells to other businesses on delayed payment terms of 30 days, 60 days or 90 days, you have a strong chance of being eligible.
As we work with the leading lenders from across the whole market, we can find a solution for most business owners.
If invoice finance isn’t the right product for you and you’re not eligible, we’ll consider the alternatives available and can help to find a solution for most situations.
What is the best way to secure invoice finance as a food & drink business?
The easiest way to get invoice finance in the UK is through the ABC Finance invoice finance comparison tool.
At ABC Finance, we enable businesses to compare offers from the leading lenders in minutes to find the best finance deal for you and your company.
We hand the power to you, and away from lenders, to allow you to understand offers and control who you approach, based on which provider can offer you the best deal.
If you need further support to pick between the options available, we have a team of invoice finance experts on hand to make sense of the offers and help you to choose the best one.
Keep reading – How to Ensure You Get Paid on Time in Business
