With many businesses returning to pre-COVID levels of activity, the number of businesses using invoice finance has increased substantially. This is due to more businesses seeing the benefits of managing cash flow by bridging the gap between invoicing and payment.
With this increase in popularity, more and more people are wondering, “How much does invoice finance cost?” Understanding the costs involved is important when making decisions that could potentially benefit your business. In this blog, we’ll break down the costs associated with invoice finance and provide some insights to help you decide if it’s the right option for you.
What is Invoice Finance?
Before diving into the costs, it’s important to understand what invoice finance is. In basic terms, invoice finance allows businesses to get paid a significant portion of their invoice instantly. Rather than waiting 30, 60, or even 90 days for customers to pay, you can get paid up to 90% of that invoice value in 24 hours.
Why is this great for businesses? Well, it can help alleviate the cash flow issues that come with late-paying customers. For example, if you’ve completed a job on Monday, and you don’t get paid until Sunday, you might have wages to pay on Wednesday and suppliers to pay on Friday. You can’t meet these obligations, resulting in damaged relationships, missed bills, and financial stress.
Now with invoice finance, you can get paid a portion of your invoice instantly. Meaning you now have the money on hand to meet these expenses, and more to invest in growing your business.
How Much Does Invoice Finance Cost?
The cost of invoice finance can vary based on several factors such as the size of your business, the creditworthiness of your customers, and the specific terms of your finance agreement.
At Apollo Business Finance, we believe in transparency and clarity when it comes to fees. Below is a breakdown of the most common charges you may encounter:
Factoring Charge: This is a percentage charge applied to invoices loaded into the system. It’s processed each time an invoice is added. Importantly, there is no charge on credit notes.
Factors Discount: This charge is a percentage applied to the money advanced to your business. It’s calculated daily and processed at the end of each month.
Refactoring Charge: A percentage charge applied to invoices that have passed the agreed recourse period for the facility. This charge is processed at month-end.
Monthly Minimum Charge: A flat rate charged at the end of each month if the factoring charge does not meet the agreed-upon monthly minimum. This ensures that even in months with lower invoice volumes, the facility remains viable for both parties.
These charges are designed to be competitive while ensuring that your business benefits from a reliable and efficient cash flow solution.
Factors Influencing the Cost
Several factors can influence the overall cost of invoice finance:
Invoice Volume and Value: Larger invoices and a higher volume of invoices can reduce costs, as lenders often offer better rates for bigger businesses.
Risk: Businesses considered higher risk, such as those with CCJs or other adverse histories, may face higher fees due to the increased risk of non-payment.
Customer Creditworthiness: The creditworthiness of your customers can influence the overall costs, with less creditworthy customers potentially leading to higher fees.
Facility Type: The type of invoice finance facility you choose (such as factoring or discounting) can also affect the cost.
Is Invoice Finance Worth the Cost?
Absolutely, and here’s why: Invoice finance can be a game changer for businesses of all sizes that need working capital for growth and stability. While there are costs involved, the benefits of invoice finance far outweigh the expenses, especially when you partner with a reputable invoice finance lender like Apollo Business Finance.
At Apollo Business Finance, we offer competitive rates and a transparent fee structure, so you know exactly what you’re paying for. The immediate access to cash flow, the ability to meet financial obligations on time, and the opportunity to invest in your business without waiting for long payment terms are just a few reasons why invoice finance is a cost-effective solution.
All in all
Invoice finance can be a great tool for UK businesses looking to improve their cash flow and support their growth. While the costs can vary, it’s important to understand the fees involved and the factors that influence them.
If you’re looking for a reliable invoice finance partner, we’re here to help! Get in touch with us today to start your funding journey or learn more about our services.
