Invoice finance is where an independent third party agrees to purchase an outstanding invoice for a fee. Invoice financing has been a financial instrument available for businesses and SMEs for decades. It has been traditionally offered by lenders such as banks as well as private financiers.

In this article, we provide a high level description between the different types of Invoice Financing available in today’s market.

 

Factoring / Invoice Discounting

 

This is a business financial instrument where it utilises account receivables on the balance sheet to obtain immediate working capital by selling them on for a discounted fee.

For further readings on invoice factoring and invoice discounting, please click here.

 

Asset Based Lending

 

It is designed to allow businesses to obtain lending against the value of its assets. This could be its inventory of raw material or finished goods or even its fixed assets

 

Invoice Finance

FactoringInvoice DiscountingAsset Based Lending
Mid to long term funding needsYesYesYes
Requires business to business receivables onlyYesYesYes
Requires legal title to receivablesYesYesYes
Requires robust ‘in house’ ledger controlNoYesYes
How much advance Can be Expected.Up to 90% of the value of eligible invoicesUp to 90% of the value of the outstanding balances from eligible debtors.Up to 90% of the market value of the eligible assets
Do you collect money on my behalf?YesNoNo
Do your customer know of this arrangement?YesNoNo
Do I have protection from debtor insolvency both domestic and export?NoNoNo
Does funding increase working capital?YesYesYes
What kind of turnover is required?Small (less than 200k)Medium (less than 10 millions)Large (over 10 millions)
What are the differences in pricing?Generally more expensive than Asset based lendingGenerally more expensive than Asset based lendingGenerally cheaper than invoice factoring and invoice discounting
How quick is the assessment / on-board process?FastFastSlowest

 

InvoiceInterchange offers an online Invoice Discounting facility which is simple, flexible and fast. SMEs can either do a whole turnover invoice discounting or just sell selected invoices.

 

Get in touch to find out more