Invoice finance and asset based lending are important cash flow solutions that have been used by many businesses for decades. In this article, we will take a closer look at these two finance products.
For example, your business has provided goods or services to your customer and issued a corresponding invoice on 30 day terms. This means you will now have to wait 30 days to get paid. With Invoice Finance, you can sell this invoice to a finance provider and receive up to 90% of the invoice value upfront less a fee. Upon verification, funds are usually transferred to your bank account within 24 hours.
On the invoice due date, your customer will either continue to pay to your business bank account or directly to financier’s bank account, depending on the facility type.
Asset Based Lending
Asset based lending is designed to allow businesses to obtain funding against the value of their assets. This could be its inventory of raw or finished goods, accounts receivable or even its fixed assets like equipment and property.
The table below provides a summary of each of the mentioned finance products:
Invoice Finance
Factoring
Invoice Discounting
Asset Based Lending
Mid to long term funding needs
Yes
Yes
Yes
Requires business to business receivables only
Yes
Yes
Yes
Requires legal title to receivables
Yes
Yes
Yes
Requires robust ‘in house’ ledger control
No
Yes
Yes
How much advance can be expected.
Up to 90% of the value of eligible invoices.
Up to 90% of the value of outstanding balances from eligible debtors.
Up to 90% of the market value of the eligible assets.
Do you collect money on my behalf?
Yes
No
No
Will your customer be aware of this arrangement?
Yes
No
No
Do I have protection from debtor insolvency both domestic and export?
No
No
No
Does funding increase working capital?
Yes
Yes
Yes
What kind of turnover is required?
Any size
Any size
Any size as long as there is sufficient asset/collateral
What are the differences in pricing?
Generally more expensive than Asset based lending
Generally more expensive than Asset based lending
Generally cheaper than invoice factoring and invoice discounting
How quick is the assessment / on-board process?
Fast
Fast
Slowest
InvoiceInterchange offers online Invoice Discounting that is simple, flexible and fast. SMEs can select whole turnover invoice discounting or finance only the invoices you choose. When you get paid sooner, you can easily cover upfront costs, salaries or overheads. Talk to one of our team today to see how we can help you flexibly access working capital to grow your business.
