Invoice Finance

Invoice Finance

When a finance provider extends a short-term loan to a borrower, based on unpaid invoices, the process refers to invoice financing. In this type of financing, a company meets its short-term liquidity needs based on the generated invoices, which the customer hasn’t paid for. With invoice financing companies are benefited in improving cash flow, paying employees and suppliers and reinvesting in operations much before if they had to wait for the customers to pay the complete balance. However, the company receives the specific amount, but after a few days, since the unpaid invoices acts as an accounts receivable.

Advantages of invoice finance:

●        More flexible than business loans or other finance methods

●        Decisions to lend becomes faster against invoices

●        Funding rises along with the total turnover of the company

●        Greater level of borrowing against unpaid invoices

●        Reduces late payment risks

Disadvantages of invoice finance

●        Invoice finance solves only a specific problem and is unnecessary if a customers pay invoices on time and within the payment terms.

●        If the debtor fails to pay the invoices, finance providers will directly deal with it and the relationship between the company and the customer might get affected.

●        The invoice financing is not available if products are sold to the general public