If you’ve never heard of invoice finance, then the concept is fairly straightforward: small businesses use it as a popular funding solution to keep their cash flow moving along smoothly. But, what does Confidential Invoice Finance mean?
Typically, this kind of finance option is used by business people or entrepreneurs who may have to deal with extended payment terms from their customers – which means having access to more working capital.
Unlike an overdraft, an invoice finance option will increase according to sales, instead of being funded to the value of your house or historical trading records.
There are two kinds of invoice finance – Disclosed and Confidential. In order to understand what confidential invoice finance is, we need to understand the key differences between these two.
What Confidential Finance is: Disclosed vs. Confidential
Invoice finance is a way to borrow money once you have used unpaid invoices. So, let’s say you’ve issued invoices to customers which haven’t been paid – Invoice Finance will help you ‘unlock’ the money early.
So, as we mentioned at the start of the article that it’s kind of like a business loan; however, rather than using a physical asset as security (such as a house or building), it uses your accounts receivable. Now, how is confidential invoice finance different from disclosed?
Disclosed Invoice Finance
This option lets you access as much as 90% of the value of your outstanding invoices within 24 hours after the invoice has been raised. It also includes an extensive credit control service which allows you to dedicate more time toward speaking to customers about new business, and not outstanding invoices. This credit control process can be tailored to your exact requirements so that it’s in your hands at all times.
Disclosed facilities are ideal for business owners who want to further support sales ledger management – a designated credit controller will send out monthly statements and make the required contact with your customers.
Confidential Invoice Finance
The confidential option provides you with the same cash injection – i.e. up to 90% of your sales ledger (up to 95% with some lenders) – while the credit control procedures are restricted to in-house, which means your customers will not be aware of the involvement of a credit controller.
Businesses best suited to confidential invoice finance are those with a yearly turnover of over £500K. In addition, they must demonstrate that they are profitable and have the necessary financial systems or processes in place to run and manage credit control efficiently.
To sum it up
Just to quickly recap, choosing confidential invoice finance means:
- Having up to 95% of the value of unpaid invoices of your total sales ledger
- Loan depends on your product and payment terms in a number of days (.e. 30, 60, 90, or 120)
- Cost is calculated as a percentage of your invoice value. The rate can vary as per your business profile, the lender, and the length of the loan, along with the set-up fee.
In conclusion, confidential invoice finance is a highly viable funding option if you want your customers to remain unaware of the fact that you are securing finance against their invoices.
Get in touch with the team at Funding Bay to find out your business’s best option.
