Invoice Finance For Wholesalers
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Author: Gary Hemming CeMAP CeRGI CSP
20+ years experience in invoice finance
What is invoice finance for wholesalers?
Invoice finance is a financial product that allows wholesale businesses to release money against their unpaid invoices.
Invoices raised on delayed payment terms of 30 days, 60 days or 90 days+ can be financed through invoice finance, meaning you receive a percentage of the money within 24 hours.
The amount raised is usually 90-95% of the total value of the invoice.
It’s a financial product designed to improve cashflow and enable business growth without your bank balance holding you back.
How does it work?
It works as follows:
- Balance received – Once the invoice is paid, you receive the balance, minus your agreed finance charge.
- Invoice sent – You send an invoice to your customer in the usual way and provide a copy to your funder.
- Advance payment received – Within 24 hours, you receive advance payment from your lender, up to 95% of the value of the invoice.
- Credit control – Credit control is handled either by your business or the funder, depending on the type of facility chosen.
Are there different types to consider?
Yes, the main types to consider are:
- Invoice discounting – Invoice discounting allows you to borrow against your unpaid invoices and retain control of your sales ledger, handling credit control in house.
- Invoice factoring – Invoice factoring allows you to borrow against your unpaid invoices and passes credit control to your funder.
- Selective invoice finance – Selective invoice finance, also known as spot factoring, allows you to fund either a single invoice or to pick and choose several invoices that you would like to borrow money against.
What are the alternatives to invoice finance for wholesale businesses?
The alternatives are:
- Business loans – Business loans allow you to borrow a lump sum and repay it through regular monthly repayments over a set term. Unsecured business loans are a fast way to borrow; secured business loans allow you to borrow more money and repay over a longer term.
- Revolving credit – Revolving credit includes business overdrafts, company credit cards or standalone business revolving credit facilities. These facilities all offer an extra emergency fund that can be used when your cashflow requires.
- Asset finance – Asset finance can be used to purchase new equipment, assets, machinery or tech hardware or software. Asset refinancing can be used to release funds from existing assets.
- Property finance – A commercial mortgage can be used to purchase or refinance your business premises. A remortgage can involve a significant capital raise, should the loan to value allow.
What are the advantages and disadvantages of invoice finance for wholesalers?
The advantages are:
- Improved cashflow – Upfront payment for invoices will dramatically and immediately improve your cashflow, leaving you free to focus on running your business.
- Flexibility – It’s a flexible way to borrow that can even grow as your business does.
- Credit control support – Should you choose a factoring facility, your lender will take on responsibility for managing your accounts receivable and will handle the full credit control process.
The disadvantages to consider are:
- Cost – While the cost of borrowing is low compared to many types of business finance, there is still a cost to consider.
- Credit control may not be ideal for you – While credit control support from a debt factoring facility can save time and resources, it isn’t right for everyone. Credit control support will also alert your customers to your use of invoice finance.
Will I be eligible?
If your business sells to other businesses and operates on delayed payment terms of 30 days or more, there is a good chance that you’ll be eligible for invoice financing.
The specifics of the product offered will depend on the terms of your invoices and the strength of your customers.
To find out exactly what you could get, either use our online comparison tool or get in touch with our team of experts, and we’ll be able to give you a strong indication within minutes.
What is the best way to secure invoice finance as a wholesale business?
The best way to secure invoice finance for a wholesale business in the UK is by using the ABC Finance invoice finance comparison tool.
It’s an online platform that places you in control and has lenders compete to offer you the best deal.
Simply input your company details and the details of your requirements, and within minutes, lenders will begin offering their most competitive terms.
Once you receive an offer that you’re happy with, you can progress your application in a single click.
If you’re unsure which offer works best for you, or want more details around service levels and which lender would be a good fit, our team of experienced advisors is on hand to advise you.
