What Is Invoice Funding?

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A business without sufficient customers, or indeed any customers, is not going to survive for any length of time and the reason for this is due to the absence of revenue coming in, this then means that the debts owed by the company will quickly engulf the business as a whole. However, a customer is only ever beneficial to a company if they actually settle their outstanding accounts, otherwise, they can significantly clog up and jam the wheels of commerce.

If you are a business owner and rely upon invoices to acquire the funds owed to you by your customers, you will no doubt be painfully aware of how frustrating it is trying to acquire the funds that you are rightfully owed. As the customer drags their feet and is tardy with their payment, you are left in the unenviable position of trying to fend off all the creditors to whom you currently owe money to.

Thankfully, there is a method to actually unlock the value of the invoices that you have sent to your clients, and this invoice funding, a specialized type of business  financing  that will ensure that efficiency and productivity is maintained at peak levels at all times. The manner in which invoice funding is extremely straightforward, but, as has been rightfully identified and noted by very wise men, the simplest solution is typically the best.

With invoice funding, a business will submit copies of their outstanding invoices to a factoring agency who will then assume full responsibility for the collection process. In other words, it is the factoring agency who will ask the client for the money owed, and in the event that the client should not pay, it is the factoring company that will initiate the legal proceedings for the recovery of the debt.

The factoring company will provide an upfront capital sum to the business which has submitted the invoices to them, and this can be as high as 90%, and will be paid in a very short period of time indeed, with some factoring companies able to deliver the funds within one working day.

The factoring agency, as noted earlier in the article, is responsible for recovery of the balance owed on the invoice and so when they do receive the balance owed, they will deduct a percentage of the balance that they acquire from the client as their commission. The remaining balance owed will then be transferred to the business that provided the factoring company with the invoices in the first instance.

This may seem like a rather convoluted process to acquire the money that is already legitimately owed to the business, but the major benefit with relying upon this particular method of business  financing  is that the business will be able to get near instant access to the cash owed.

This means that it is in a much stronger position financially, and so the occurrence of unexpected and sudden expenses, such as fire or flood will not cripple the business as a whole, too severely.

Source by RW Goldberg

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