Invoice Financing F.A.Q’s

Questions on Invoice Financing

Small businesses often resort to invoice financing when they generate an invoice for their client but cannot afford to wait for the payment to be made. To ease this cash flow burden, small businesses will engage a third party, to pay them an advance on the invoice and then collect the full payment from their client, effectively taking the burden off themselves.

Today we’ll tackle a few more questions to be answered about Invoice Financing!

How to qualify for Invoice Financing?

Invoice financing is a relatively simple process, however, you must first qualify for invoice financing. To qualify, your business needs to be in operation for at least 2 years and your business invoices must have at least a 90-day payment period. 

The steps to invoice financing are as follows:

  1. First, invoice your client.
  2. Then, assign the invoice to your preferred financier.
  3. Upon successful approval, receive an advance on your total invoice value of up to 80%.
  4. Your client to make the full payment to your assigned financier.
  5. Upon settlement of the financing, receive the balance of your invoice value after deductions from the financier. 

If you would like to read more about how this works, check out our article, Invoice Financing: A User Guide

How is my Client relationship affected by Invoice Financing?

With Invoice Financing, the relationship with your client essentially remains unchanged. You will continue to work and supply your client with goods and services. You will also continue to bill your client the invoices for your work. The only difference is that you will not directly engage the client for the payment of the invoices. 

By having your invoice financed by a third party, the financier will deal with your client directly and collect the full payment of your invoice within the time frame stipulated.

Do I have to finance all my invoices?

The answer to this question varies with the products the financier offers. If you have agreed to spot financing, where you get to pick and choose which invoices to finance, then the answer is a definite, no. 

However, most financiers prefer contract financing, where they require a minimum monthly invoice volume from you as a business. In this case, the answer is, maybe. Depending on the value of your generated invoices and if they meet the minimum monthly amount for financing, you may need to submit more invoices to fulfil the requirements for financing. So remember to take this into account when engaging a company for invoice financing. 

Hopefully, some of these answers will help you in your journey to invoice financing.


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