Invoice Finance For Professional Services Businesses

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What is invoice finance for professional service businesses?

Invoice finance is a financial product whereby a lender uses unpaid invoices as collateral for funding, giving you quick access to a percentage of the value of those invoices. Funds are usually released within 24 hours of each invoice being raised.

The amount of money a provider will ‘advance’ as a percentage of each invoice is based on your industry, the financial strength of your customers and its own risk criteria.

How does it work?

It works as follows:

Credit control – Credit control runs either as usual, or your lender takes responsibility, depending on the type of facility chosen.
Invoice paid – Once the invoice is paid by your customer, you receive the remaining balance, minus your finance charge.
Raise an invoice – Raise an invoice to your customer as you usually would and provide a copy to your funder.
Payment advance – Your finance provider releases an agreed percentage of the invoice value, usually somewhere between 80-95%, depending on the lender chosen.

Are there different types to consider?

Yes, there a three different types. They are:

Invoice factoring – Invoice factoring allows you to use unpaid invoices as collateral for borrowing, and once funds have been advanced against an invoice, it is assigned to the lender, who handles the full credit control process on your behalf.
Invoice discounting – Invoice discounting works in a similar way to invoice factoring, but differs around who is responsible for credit control. Discounting leaves this responsibility with you to manage in house.
Selective invoice finance – Also known as spot factoring, selective invoice financing is a standalone facility that allows you to pick and choose which invoices to finance. In some cases, these facilities are only used once to fund a single invoice.

On top of the different types, there are other add ons or variations to consider, including bad debt protection and asset based lending.

What are the pros and cons of invoice finance for this industry?

The pros are:

Improved cashflow – By receiving upfront payment on your invoices, your business cashflow will dramatically improve, taking away a major headache.
Credit control support – If you choose a debt factoring facility, your lender will take over the credit control process, removing a time consuming and often awkward task from you.
It’s fast – Funds are released to you within 24 hours of a new invoice being raised, making it one of the fastest ways to borrow money.

The cons are:

Only suitable for B2B invoices – Invoice financing can only be used to support B2B invoices, so if you sell to a lot of sole traders, you may still need further cashflow support.
Control of customer relationships – If passing on credit control will cause an issue with customer relationships, then consider a confidential invoice discounting facility to ensure you retain control of your sales ledger.

Will I be eligible?

If your business sells to other businesses on delayed payment terms between 30 to 90 days, there is a good chance that you’ll be eligible.

As we work with lenders from across the invoice finance market, we can find a suitable lender for most businesses. We can even offer invoice finance for phoenix businesses and invoice finance for startups.

What is the best way to secure invoice finance as a company in the professional services industry?

The easiest way to secure this type of finance is by using the ABC Finance invoice finance comparison tool.

Our online platform allows you to quickly secure offers from the market’s leading lenders using our rapid tendering technology.

You simply input your business details and finance requirements, and within minutes, the market’s leading lenders begin to offer their most competitive terms in an effort to win your business.

Once you’ve received an offer that you’re happy with, simply progress your application in a single click. If you need further support, our team of experts are on hand and ready to support you in choosing between the offers available.