Invoice Finance For Startups In The UK

What is invoice finance for startups?

Invoice finance is a type of business finance that allows startup businesses to release the funds from their unpaid invoices.

Invoice finance is a product that is designed to support business cashflow over the longer term, with facilities often remaining in place for many years.

Businesses that operate on delayed payment terms of 30 days to 90 days and that sell to other businesses could qualify.

Even if your business is a startup with no trading history, you may still be able to secure finance as long as your customers are reasonably strong.

How does it work?

It works as follows:

1. Invoice settled – When the invoice is settled, you receive the balance, minus your agreed fees and charges.
2. Invoice raised – You simply raise your invoice to your customer as you usually would and send a copy to your funder.
3. Receive payment – Your lender pays you up to 95% of the invoiced amount within 24 hours.
4. Credit control – Depending on the product chosen, either your business or the lender will chase the invoice for payment. Invoice factoring sees the lender handle credit control, and invoice discounting leaves the responsibility with you.

Are there different types to consider?

Yes, there are 3 different types of invoice financing to consider for start-up businesses. They are:

• Invoice factoring – Invoice factoring is the most common form of invoice finance for startups. It enables you to finance your entire sales ledger and passes credit control to your funder, known as your factor.
• Invoice discounting – Invoice discounting allows you to finance your entire sales ledger, but leaves you in charge of credit control. This is usually used by larger businesses, but could be considered by startups that have robust credit control in place.
• Selective invoice finance – Selective invoice finance allows you to pick and choose individual invoices to receive advanced payment on. Once funds are released, your finance company chases payment on your behalf.

What are the pros and cons of invoice finance for start-ups?

The advantages are:

• Improved cashflow – The biggest benefit is the cashflow boost received when you use invoice financing.
• Credit control support – Nobody goes into business to chase invoices, so support in this area can free up your time and resources.
• Flexibility – These facilities are highly flexible and can grow in line with your business growth.

The disadvantages to consider are:

• There is a cost – While the cost of these facilities is low, there is still a cost that could reduce your margins.

Will I be eligible?

If your business operates on delayed payment terms of 30 days, 60 days or 90 days and your customers are other businesses, there is a good chance that you’ll be eligible.

If you’re unsure, get in touch with us today, and we’ll be able to quickly understand your business and your likelihood of qualifying for invoice financing.

If this is the best route, we can help you find the best deal. If it isn’t, we can consider other finance options that could be a better fit for your business.