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What is Invoice Finance and how does it work?

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What is Invoice Finance and how does it work?


Invoice finance works to provide business owners with a cash injection towards unpaid invoices. Improving a business’s cash flow with invoice finance helps to pay suppliers, employees and other crucial elements faster than if they were to wait for a customer to pay their balance in full. An invoice finance provider can usually provide between 80-90% of a business’s invoices in a very short period, to get the business one step ahead. Once the customers pay the invoice, they will typically release the amount minus the fees.

Research published by IGF in 2018 state that 27% of business with a turnover of between £1 million and £500 million use invoice finance. For many businesses, invoice finance is an essential part of their cash flow model. The report, published by IGF Powering Freedom Report used data from 500 UK businesses.

Statistics provided by UK Finance show that 45% of their members deal with invoice finance clients that have an annual turnover of under £1 million. Suggesting that invoice finance can be implemented by most businesses regardless of annual turnover should the need arise to support cash flow and overall strategy.

There are two different ways of implementing invoice financing for your business, which is invoice factoring and invoice discounting. Invoice factoring is a way for businesses to fund cash flow by selling their invoices to a third party (known as a factor, or factoring company) at a discount. If you’re a smaller business whose resources would be better spent on your day-to-day activities then factoring could be the better option for you.

Invoice discounting is similar to factoring, in that it gives you access to cash as you issue new invoices. However, a key difference is that you’ll be responsible for collecting your payments, while your use of an invoice finance product will be kept completely confidential from your customers. You can find more details about the different types of invoice financing here: https://finance.yahoo.com/news/invoice-financing-184900389.html

Invoice finance is a very important support mechanism that can relieve businesses from waiting for a customer to pay their balance in full. This will help you to focus on other areas of your business, whilst we do the heavy lifting and keep your cash flowing. Saffron Financial and Saffron Invoice Finance take pride in helping a company resolve unpaid invoices. Take a look at what we can do to implement an Invoice finance strategy to a business, and you can contact us to find out more.


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Who are Saffron Invoice Finance?

Saffron Invoice Finance is part of FCA regulated Saffron Asset Finance. 

It specialises in offering securitised working cash injections to viable SMEs businesses. Invoice Finance enables you to release the cash tied up in outstanding customer invoices, so you don’t have to wait weeks or months for payment.

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