Invoice financing is funding obtained against unpaid customer invoices before their contractual due dates. The business receives cash based on eligible receivables and repays the financier from collections or through another agreed settlement mechanism.
How does Invoice Financing work in practice?
The business uses unpaid invoices to obtain cash before their due dates. The provider verifies eligible invoices and either lends against them or purchases them, depending on the product. Customer collections are then directed or reconciled according to the agreement. The financing record should distinguish the invoice amount, funded amount, reserve, fees and final settlement.
What should a business document for Invoice Financing?
Retain the financed invoice, customer acceptance evidence, advance amount, reserve, fees, recourse terms, assignment notices and collection record.
What should a business verify before relying on Invoice Financing?
An issued invoice is not automatically financeable. Disputes, concentration, dilution, overdue status and weak delivery evidence can reduce eligibility.
