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Borrowing against invoices

By raising funds against the value of your invoices you can really improve your cashflow, but are factoring or invoice discounting right for you? Invoice finance comes in two key forms – factoring and invoice discounting. For both, cash is immediately advanced to you when you raise an invoice. You can draw an agreed percentage of each invoice, with the balance, minus fees, paid on settlement. The difference between the two is that factoring provides an additional service of sales ledger and collection management. Invoice finance does not necessarily work for all types of business though. It is particularly suitable for partnerships and limited companies selling goods or services on credit to other businesses.

In Brief: Invoice Discounting

  • Get up to 90 per cent of the value of invoices
  • Retail and cash businesses are less appropriate than manufacturers, distributors and service providers
  • Can help to even out cashflow
  • The charge is a one-off percentage of turnover, plus interest on amounts borrowed


  • The amount advanced grows as your company expands
  • It can improve cashflow and give you flexible access to additional funds
  • Can help introduce credit control discipline into your business


  • It only works for those businesses that sell products or services on credit to other businesses
  • It’s not the cheapest form of finance
  • You can get tied into long contracts