Selective invoice financing

Invoice finance is a type of u003ca href=u0022https://swoopfunding.com/ca/knowledge-hub/asset-finance/u0022u003easset financeu003c/au003e that enables you to borrow money based on what your customers owe to your business (accounts receivable).u003cbr data-rich-text-line-break=u0022trueu0022 /u003eu003cbr data-rich-text-line-break=u0022trueu0022 /u003eUnpaid invoices of course represent money that will be paid to you. You might offer your customers payment terms of 30, 60, 90 or even 120 days. Assuming your customers pay on time, the value of your sales is still locked in for those 30, 60, 90 or 120 days.u003cbr data-rich-text-line-break=u0022trueu0022 /u003eu003cbr data-rich-text-line-break=u0022trueu0022 /u003eu003ca href=u0022https://swoopfunding.com/ca/knowledge-hub/asset-based-lending/u0022u003eSelective invoice financingu003c/au003e lets your company borrow against specific invoices, rather than your entire sales ledger. This form of invoice finance is suitable if your company generates a significant proportion of its income from large, steady customers, and you only want to finance those invoices. Selective invoice financing can also help Canadian SMEs raise working capital if they have fluctuating cash flows, as borrowing against their sales ledger may not be cost-effective. u003cbr data-rich-text-line-break=u0022trueu0022 /u003eSelective invoice financing comes in two forms: selective invoice discounting and spot factoring.

If you’re a small business with seasonal fluctuations in cash flow, a factoring facility, which is usually whole revenue (i.e. you have to factor your entire sales ledger), might not be the most cost-efficient way for you to raise working capital. You might instead look at selective invoice finance – where you can choose to finance specific invoices. There are two main types of selective invoice finance: u003ca href=u0022https://swoopfunding.com/ca/knowledge-hub/spot-factoring/u0022u003espot factoringu003c/au003e and u003ca href=u0022https://swoopfunding.com/ca/knowledge-hub/selective-invoice-discounting/u0022u003eselective invoice discountingu003c/au003e.

u003cstrong data-rich-text-format-boundary=u0022trueu0022u003eInvoice discounting u003c/strongu003eu003cbr data-rich-text-line-break=u0022trueu0022 /u003eu003ca href=u0022https://swoopfunding.com/ca/knowledge-hub/invoice-discounting/u0022u003eInvoice discountingu003c/au003e is the simplest type of invoice finance. It involves a lender advancing you money against unpaid invoices and charging a fee based on the value. This form of finance is suitable for bigger companies with a relatively high revenue as it allows them to secure funding against their entire sales ledger. u003cbr data-rich-text-line-break=u0022trueu0022 /u003eInvoice discounting is confidential, so your customers don’t know you’re using their invoice as collateral. Your company remains in charge of its own credit collection. It’s also considered riskier so your lender may require evidence that your customers pay promptly and you have in-house capacity to chase outstanding payments. u003cbr data-rich-text-line-break=u0022trueu0022 /u003eu003cbr data-rich-text-line-break=u0022trueu0022 /u003eu003cstrongu003eInvoice factoring u003c/strongu003eu003cbr data-rich-text-line-break=u0022trueu0022 /u003eu003ca href=u0022https://swoopfunding.com/ca/knowledge-hub/invoice-factoring/u0022u003eInvoice factoringu003c/au003e also lets bigger companies borrow money against their sales ledger, but it’s different to invoice discounting because the process is disclosed. The lender takes control of your credit collection and deals directly with your customers. They pay the lender, who then forwards you the balance less their fee. u003cbr data-rich-text-line-break=u0022trueu0022 /u003eInvoice finance can benefit smaller businesses as it means they don’t have to chase their outstanding payments, although they have to prove to the lender they generate a reliable revenue. However, it may not be cost-effective for SMEs with fluctuating cash flows.  u003cbr data-rich-text-line-break=u0022trueu0022 /u003eu003cbr data-rich-text-line-break=u0022trueu0022 /u003eu003cstrongu003eSpot factoringu003c/strongu003eu003cbr data-rich-text-line-break=u0022trueu0022 /u003eu003ca href=u0022https://swoopfunding.com/ca/knowledge-hub/spot-factoring/u0022u003eSpot factoringu003c/au003e allows you to borrow money against specific unpaid invoices rather than your sales ledger, so it’s also suitable for companies with at least a few large customers. The main difference with selective invoice discounting is that spot factoring is disclosed. You hand over control of the invoices you choose to finance to the lender who collects payment from your customer and forwards your company the balance less its fee. Spot factoring may suit SMEs that don’t have the resources to chase outstanding payments and are happy to let a lender take the responsibility on their behalf. u003cbr data-rich-text-line-break=u0022trueu0022 /u003eu003cbr data-rich-text-line-break=u0022trueu0022 /u003eu003cstrongu003eConfidential invoice finance u003c/strongu003eu003cbr data-rich-text-line-break=u0022trueu0022 /u003eu003ca href=u0022https://swoopfunding.com/ca/knowledge-hub/confidential-invoice-finance/u0022u003eConfidential invoice financeu003c/au003e is a suitable funding option if you prefer your customers to remain unaware that you’re securing finance against their invoices. u003cbr data-rich-text-line-break=u0022trueu0022 /u003eConfidential invoice finance refers to forms of invoice finance that aren’t disclosed to your customers.