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• 12 Oct

  Small Business Invoice Factoring

  Financing for businesses comes in all shapes and sizes, as do the businesses that it serves. This article focuses on the needs of small businesses, and one particular service that can increase cash flow.

  This product discussed in this post is small business invoice factoring, a financing service aimed explicitly at micro companies that need additional working capital and credit control support.

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  Definition: What Is Small Business Invoice Factoring?

  Small business invoice factoring is a financial tool designed to help smaller companies access the cash from their unpaid invoices before customers pay. By partnering with a factoring company, small businesses can transfer their outstanding invoices in exchange for an upfront advance of most of the invoice value, improving cash flow.

  The factoring provider then takes over collecting payments directly from customers and once the invoices are paid, the remaining balance is forwarded to the business, minus a service fee. This solution allows small businesses to focus on growth without the stress of delayed payments.

  Small Business Invoice Factoring

  Smaller companies can use invoice factoring to release the cash that is tied up in their unpaid accounts receivable. These are the outstanding invoices that they are owed by their customers. If a company has a number of unpaid accounts, it may be able to receive prepayments against them to generate a substantial amount of additional working capital.

  Additionally, the product also includes a credit control service. This means that the finance company will help collect the unpaid invoices. This can free up the business owner's time or mean that they don't need to employ a credit controller.

  See also: Small Business Financing Options

  How The Small Business Finance Factoring Service Works

  As invoices are raised for either products delivered or services provided, the company submits them to the factoring company. Subject to specific funding rules set out in the agreement that governs the small business finance factoring service, the prepayments are made available against the invoice values. The balance of the invoice value, minus the fee for using the service, is passed to the small business once the debtor pays the invoice.

  Micro companies can choose to submit all of their invoices or just a selected few invoices. The latter option can help them control the costs and generate funding only when it's needed.

  Why Invoice Finance Is Ideal For Small Businesses

  Invoice finance for small businesses is an essential solution for managing cash flow and overcoming the challenges of late payments. Small businesses often struggle to maintain liquidity while waiting for invoices to be paid, but invoice finance allows you to access cash quickly, without taking on additional debt. Let FundInvoice help you find the right provider for your business size and needs, call us on 03330 113622 for help.

  See our related article: Startup Loans For Businesses.

  Who Qualifies For Funding Using Invoice Factoring For Small Business Customers

  Invoice factoring for small business customers can be a lifeline and it can support rapid expansion. Qualifying is not difficult as this type of funding is normally available where other forms of business financing are not. Small business invoice discounting options (funding only without credit control) are also available in many cases.

  Small UK companies can access this type of funding providing they sell products or services to other businesses either in the UK or abroad. As the funding is secured against the invoices, it takes little account of the financial standing of the small business. This means that new companies or those without any track record can access this type of financing. This is different to other forms of business finance such as loans and overdrafts.

  There are no set minimum criteria. Companies can use this service for individual invoices if required or for all of their invoices to release the maximum amount of additional cash.

  What Are The Costs?

  The costs depend upon the type of facility chosen and the size of the business. There are some details of how the fees work and examples of costs shown in our section on funding startups and small businesses.

  How To Get Small Business Invoice Factoring

  There are a number of UK providers of factoring to choose from. However, not all UK factoring providers will suit every customer. Call FundInvoice on 03330 113622 for help obtaining the best small business invoice factoring facility for your company.

  By Glenn Blackman