Invoice Finance is the generic terms that describes both the industry and the product that provide finance against invoices that a business raises to other businesses.
Under the umbrella of invoice finance there are various products including:
Invoice Discounting – this is where a finance company will provide finance against the invoices raised by a business but the responsibility of collecting the debts in remains with the business itself. This type of facility can be either disclosed or confidential.
Factoring – this is where an invoice finance company purchases the debt from a business and not only provides finance but also provides the credit control function – i.e. they chase the debts. Disclosed factoring is by far the most common form of finance however confidential factoring can be sourced.
CHOCS – this stands for ‘clients handles own collections’ and operates in the same way as a factoring facility. However, the factoring company allows the client to do their own credit control.
Beyond this there can be recourse and non-recourse facilities for all these types of facilities.
When choosing your facility it is important to consider what you require from the facility and then it is worth speaking with an invoice finance broker to see what facilities will best meet your needs. It is important to remember that each lender has it’s own criteria and capabilities.