A rising number of companies are turning to invoice financing companies when they need to generate capital quickly using unpaid invoices. There are two types of invoice financing available and these are invoice factoring and invoice discounting. So, what is invoice financing? Put simply, invoice financing involves either borrowing money against or selling your invoice. Discounting refers to borrowing money against your invoice from a finance company. You remain in full control of contacting your client about payment and settle your debt once they have paid. Discounting may be right for you if you don’t want your client to know you’ve been working with a third-party, your invoice isn’t late, but you just need the money early, you have a good relationship with the client, are happy to chase payment up yourself or think they will be buying from you again.
Discounting and factoring
Factoring could be the best choice if you don’t expect the company to purchase products or services from you again, you’d rather leave someone else to chase up payment, the invoice is overdue or you don’t mind the company finding out you’ve turned to an outside company to secure payment. Whether discounting or factoring is right for you will depend on what your relationship with your client is like amongst other factors.
Make an informed choice
Invoice financing is a highly-effective way to obtain the capital you need, when you need it. You may need the money to settle your own debt, take advantage of a great investment opportunity or simply get a valuable cash flow boost for any other reason. It could be wise to speak to a number of different companies about what they have to offer so you can compare their services and make an informed decision.