Invoice Finance is a short-term borrowing process in which lenders use unpaid invoices as security against funding. It enables businesses to gain quick access to a portion of their outstanding invoices, which is ideal for securing rapid cash flow or investment purposes without affecting their balance sheet.

Invoice finance options offer short-term flexibility and are commonly used by businesses to unlock cash that may be tied up in outstanding invoices. Forms of invoice-based lending include invoice discounting, invoice factoring and spot factoring.

However, invoice finance is a niche and specialist market that can be complex and risky to navigate alone, which means it’s vital to speak with an expert. Hectocorn’s relationships with niche invoice finance lenders help business owners and entrepreneurs successfully secure significant funds borrowed against outstanding invoices.

Finance-based invoicing involves lenders using a portion of unpaid invoices as security against a loan. It typically enables borrowers to generate working capital within a couple of days rather than waiting for the standard length of payable debts, typically 30 days.

Invoice financing usually works one of two ways, depending on the lender’s criteria and the terms of the agreement:

Invoice Factoring

Enables businesses to generate money against unpaid invoices immediately. Lenders will typically allow borrowing of up to 90% of the total values of the invoices. The lender effectively becomes a creditor and will manage the borrower’s sale ledger, collect invoice payments directly from customers and deduct factoring costs before paying the outstanding balance.

Invoice Discounting

A series of short-term business loans in which the lender uses several invoices as financial security. The lender knows that a business is owed money and agrees to lend them capital until a customer pays their invoice. Through invoice discounting, a company sells its unpaid invoices to a lender, which releases money back into the business. The process is confidential, so customers won’t be aware that the company is using a finance provider and the lender won’t contact them to recoup outstanding invoices.

It’s vital to understand the significant risks associated with invoice financing before applying. Lenders will conduct credit checks as part of their application process, which could impact an organisation’s credit report. A successful invoice financing deal also depends on customers paying outstanding bills and lenders may hold the borrower accountable if they fail to deliver. While some invoice finance agreements involve charges and fees depending on the service required.

Invoice financing enables organisations to use the value of outstanding invoices to fund short-term business initiatives. Crucially, invoice financing is not a method for covering bad debt or solving issues related to clients consistently paying invoices late.

Invoice finance deals are often used to secure working capital that facilitates business purchases such as:

• Rapid access to cash to fund a new business opportunity
• Solving a short-term cash flow issue, such as urgent debts or to pay new contracts
• Providing the budget for a big-ticket purchase, such as a merger and acquisition or reinvestment opportunity
• Negotiating an early payment discount with a creditor or bringing flexibility to an agreed overdraft

Invoice financing is eligible for established businesses with strong, clear and accurate trading history. Lenders will want to see a history of up-to-date financial statements, collecting money owed through invoices, clients paying their invoices promptly or on time, and no payment disputes with customers. Businesses with a backlog of debts and clients who fail to pay invoices on time will be viewed as high-risk and unlikely to secure invoice financing.

Lenders will typically only issue invoice financing to businesses whose customers pay invoices within 30 to 90 days. Lenders are less likely to approve an application if a company’s customers take longer than 90 days to pay invoices. But lenders will examine applicants’ customers and their paying habits to discover whether they have a history of paying bills on time.

Typically, invoice financing is only available to business-to-business (B2B) organisations that trade goods or services with other companies. Businesses need to provide proof that they issue invoices to customers, which assures lenders that they will get their money back.

Lenders will review more significant finance invoicing deals, which involve borrowing hundreds of thousands or even millions of pounds, on a case-by-case basis. Each lender has its own criteria and risk appetite that will affect the outcome of an application, depending on the borrower’s financial situation and reasons for applying for invoice financing.

Larger deals are also likely to have costs involved, especially if circumstances are more complex. But the more robust a company’s financial position and the lower the anticipated risk, the lower the cost is likely to be. However, high-value invoice financing is possible through specialist lenders that are experienced in dealing with ultra-high-net-worth individuals.

Invoice financing is a short-term financial solution that helps organisations gain rapid access to liquidity, quickly pay off debts or leverage an unexpected business opportunity. Time is of the essence in these situations, and Hectocorn has demonstrable experience getting invoice financing deals completed quickly and smoothly.

Invoice finance is a niche and specialist part of the financial market, and the complexity

and risks involved make it difficult to secure the best deal alone. Hectocorn’s relationships with these specialist lenders enable us to handle the most complex financial scenarios involving complex circumstances.

Hectocorn specialises in helping ultra-high-net-worth individuals secure invoice finance agreements and gain rapid access to liquid capital. We can help you borrow significant amounts against your invoices, typically worth several hundred thousand pounds, which you’re highly unlikely to be able to secure from mainstream lenders.

Hectocorn analyses your financial expectations, goals and circumstances to fully understand your individual needs. We then work with niche lenders to develop a bespoke financial package that meets your specific requirements both now and in the future. This process is crucial to securing the best rates and terms in the shortest possible timeframe and securing the most effective repayment structure.