Many small and growing businesses have taken advantage of invoice finance or factoring.
It’s typically very flexible, with the amounts you can borrow being linked to your sales ledger, not to a fixed amount.
The amounts you can borrow can often exceed what’s available through an overdraft.
It’s more accessible to businesses with weak credit histories or performance records.
It’s possible to set up an invoice finance arrangement very quickly, which is useful when your business is facing a cashflow crisis.
The disadvantages of invoice finance
There are situations where invoice finance may not be the most appropriate method of raising working capital.
It’s not suitable for most businesses that sell to consumers. However, it can be very useful in B2B situations.
A third party is being added to the relationship between supplier and customer, which can sometimes create administrative issues.
Not all business owners feel comfortable using invoice finance.
The choice between an overdraft and invoice finance, as a way of raising working capital, comes down to numerous factors, making it impossible to generalise over which is better than the other.
How we help businesses raise finance
If you’re considering whether to take out an overdraft facility or set up invoice finance, we suggest you talk to a business finance specialist such as ourselves. We’ve helped numerous UK businesses find a finance solution that works for them.
Rather than waste your time trying to decide what’s right for you, give us a call and chat through the options with one of our finance team.
As a founder of multiple businesses, Jamie believes that mindset, discipline and ambition are key drivers for success, both for his businesses and for his clients.
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Disclaimer: JD Capital Finance (Registered office -First Floor, Steeple House, Church Lane, Chelmsford, England, CM1 1NH, Registered Number 10128297) helps UK firms access business finance, working directly with businesses and their trusted advisors. We are a credit broker and do not provide loans ourselves. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. JD Capital Finance can introduce applicants to a number of providers based on the applicants’ circumstances and creditworthiness. JD Capital Finance may receive a commission or finder’s fee for effecting such introductions.