You’ve no doubt already heard the terms “invoice financing and factoring” while trying to finance your business. That said, your expertise is in the field in which you’ve opened a business. Unless it’s a financing business, you likely have no idea what those terms mean.
Invoice financing and factoring refer to a specific type of business funding. It’s not the normal kind of business loan, however, it’s similar to a secured loan, but not quite. Like a secured loan, the funding is secured by any unpaid client invoices you have.
So either option allows you to borrow against the perceived value of any unpaid invoices you may have. Invoice financing and invoice factoring go a step further, allowing you to close the gap you have between the invoice date and the due date as long as you’re willing to pay a fee.
Invoice finance isn’t a good fit for everyone. It’s best if you have either an in-house credit control system, or if you’ve outsourced invoice handling.
You receive funds that equal a certain percentage of your outstanding invoices, based on the specific agreement you’ve signed.
This is usually around 90%, though that number may change depending on various factors.