Frequently Asked Questions

Invoice financing is a collective term for financial products that enable businesses to free up cash tied in outstanding invoices.

This includes both buyer-led solutions, where a company provides financial benefits to their supplier by leveraging their superior credit rating (like supply chain finance), and supplier-led solutions, where a company uses its unpaid invoices to access immediate cash from a funder (like factoring and invoice discounting).

This form of finance helps improve cash flow, reduce payment cycle times, manage risks associated with late payments, and allows businesses to reinvest in growth sooner.

The answer will differ based on the form of invoice finance being used. It is, however, generally different from traditional loans in that it uses invoices as the underlying mechanism for finance.

In the case of buyer-led financing, it can be more flexible than a loan as it allows a buyer to negotiate better payment terms with the supplier while providing the supplier with a cost-effective financing option to improve their working capital. Key here is that the finance is extended on the basis of "payables" that the business is already incurring. So the Buyer's ability to service the facility should generally not be a concern to the funder, nor should the supplier's ability to repay an advance.

Supplier-led financing, differs in that suppliers use their outstanding invoices to seek immediate cash from a lender. This helps suppliers increase their working capital and is beneficial if the buyer is taking a long time to pay or if the supplier has cash flow constraints.

Traditional loans provide a lump sum amount that needs to be repaid with interest over a predetermined term, invoice financing links the finance facility directly to the sales made / expenses incurred, thus making it more flexible as it grows with the companies using it.

The answer depends on the form of invoice financing being considered.

For buyer-lead invoice financing, it's of little relevance to the buyer's customers and so it's unlikely that they need to know or will even be informed.

With supplier-lead invoice financing, it's common for the customer (buyer) to be informed, either of a cession or where the funder is collecting invoice payments on behalf of the supplier. Some forms of factoring, however, can be "confidential." In those cases, the customer is not informed and the funder and supplier have an arrangement that covers the confidentiality and repayment process.

Buyer-led invoice financing solutions (reverse-factoring, supply chain finance and dynamic discounting) do not directly affect a buyer's credit rating. It is not typically characterised as a debt, but rather a negotiation between the buyer and its supplier. It might help indirectly in maintaining a good credit score by ensuring timely payment to suppliers, and helping to avoid any late payments or defaults, which could negatively affect the buyer's credit score.

With supplier-led financing, including factoring, invoice discounting, and selective invoice discounting, the effect on the supplier's credit rating can also be indirect. The invoice finance itself is generally not reported to credit agencies but it can positively influence your credit rating by enhancing your cash flow, enabling timely payment of liabilities and reducing the risk of default on other obligations.

However, depending on the agreement with the funder, failure to comply with the terms of the agreement could potentially have a negative impact on a business's credit rating. An accurate measure of the impact on the business credit rating will depend on the specific circumstances, agreements with the funder and considering both financial and non-financial factors.

Generally, there is no minimum values with buyer-lead forms of invoice financing, but it will depend on the funder

For supplier-lead invoice financing, it depends largely on the funder. For selective invoice discounting there may be costs that exceed the value of the selected invoice which would make low-value invoices poor candidates. While, in factoring, there may be minimum debtors' book sizes that the funder requires

PaymentAccelerator doesn't impose a minimum value, our platform offers financing at a set fee and it's entirely up to the user as to whether they wish to finance an invoice. We pride ourselves in seeking to help small businesses try to get funding.