Invoice finance
[edit] Introduction
Invoice finance is a means of receiving early payment on invoices to improve cash-flow.
One of the key issues facing contractors and sub-contractors in the construction industry has always been that of late payment. Invoice finance is a product (or group of products) aimed at improving cash-flow for businesses who issue 30/60/90-day invoices to other businesses.
How it works:
- Once a facility is in place, the standard invoice is sent to the customer as usual.
- A copy of the invoice is sent to the finance provider who will pay a pre-arranged percentage of the invoice amount within 24 hours. The amount paid is usually between 80% and 100% of the invoice total.
- The invoice finance company will chase the customer for payment and when paid, the balance (less any fees) is sent on to the seller.
The standard process is 'factoring' - where the customer is made aware that the finance company is chasing for payment. In confidential invoice discounting, the customer is unaware that the finance company is chasing for payment.
[edit] Related articles on Designing Buildings Wiki
- Buyer-funded development.
- Cash flow.
- Construction loan.
- Construction project funding.
- Cost plans.
- Discounted cash flow.
- Equity and loan capital.
- Equity in property.
- Funding options.
- Funding prospectus.
- Leaseback.
- Mezzanine finance.
- Project-based funding.
- Real Estate Investment Trusts.
- Reverse premium.
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