What is receivables finance?
Receivables Finance encompasses both factoring and invoice discounting. A receivable is an “accounts receivable” i.e. an invoice, that is a payment due from a supplier. Often a small company suffers from late payment from large corporates, meaning that a significant part of their balance sheet is illiquid. Receivables finance unlocks the cash that is owed to the small company by selling the invoice. So, technically it is not lending, but an asset purchase. You are raising cash against your debtors. “Accounts receivable” is more of an expression used in the United States than the UK.
There are two main forms of receivables finance. First there is invoice discounting, a form of asset based finance which enables a business to release cash tied up in an invoice and unlike invoice factoring enables a client to retain control of the administration of its debtors.
Secondly, there is factoring. Factoring is usually used by companies that are smaller than those that use invoice discounting. The difference between factoring and invoice discounting is that the credit control function in a factoring facility is outsourced and that the facility is disclosed. Factoring is the sale of receivables, whereas invoice discounting is borrowing where the receivable is used as collateral.
The MarketInvoice offering
MarketInvoice offers companies a more flexible, cost effective and better way to finance their business. By selling your invoices to a network of institutional investors, companies can release capital tied up in invoices in real time. Read how MarketInvoice compares to historical financing options: “MarketInvoice vs. Invoice Discounting” and “MarketInvoice versus other financing options”. MarketInvoice is the ABFA Factoring Statistics