Glossary
Invoice finance
Borrowing against invoices you have issued but not yet been paid for, turning the debtor book into working capital.
In plain English
Invoice finance advances you most of the value of your unpaid invoices now, with the balance, less fees, arriving when your customer pays. It suits businesses that sell on 30 to 90 day terms and spend cash long before it comes back.
The economics turn on your debtor book's quality: who your customers are, how reliably they pay, and how concentrated the book is in a few names. Strong, spread debtors support a high advance rate at sensible cost; one dominant slow-paying customer does not.
Why a lender cares
An invoice financier assesses your customers as much as you, because their payments are the repayment source. In a servicing model, invoice finance is tested against the cash cycle it exists to fund: the model shows whether the facility genuinely bridges the gap between invoicing and collection, and what it costs the margin to do so.
Where this term takes you
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