Alternative business financing options UK

What is invoice finance?

Invoice finance can often be referred to as invoice trading, but ultimately means the same thing. Businesses can borrow money against their outstanding invoices. There are two ways of doing so, briefly explained below;

Factoring

Invoice finance factoring means that the company you borrow the money from takes control of your sales ledger collecting the outstanding invoices from your customer directly. You then receive a percentage of these invoices and they get the rest. Other fees include ‘discount charge’ which is interest and normally an arrangement fee.

Invoice discount

Invoicing discount finance works in a similar way; however, you collect the outstanding invoices owed from your clients directly, the finance company do not have any contact with your customers. They lend you a percentage of the money outstanding and then when the customer pays, the money is due to them. Similar fees apply to both types of invoice finance.

What is asset finance?

Asset finance solutions are offered by most high-street and mainstream lenders. This type of finance is available to businesses wanting to make large purchases such as machinery, computer systems or equipment. Asset finance lenders then collect fixed monthly repayments until the debt is cleared.

Asset loans are secured against the purchase itself, therefore if repayments aren’t made the asset could be repossessed. This alternative business financing works incredibly well for expensive purchases in the early days of the company or for companies wanting to update equipment.