{"id":2836,"date":"2020-03-23T17:42:02","date_gmt":"2020-03-23T17:42:02","guid":{"rendered":"http:\/\/localhost\/2020\/swoopMW20\/?post_type=knowledge-hub&p=2836"},"modified":"2024-08-22T18:59:37","modified_gmt":"2024-08-22T18:59:37","slug":"confidential-invoice-finance","status":"publish","type":"knowledge-hub","link":"https:\/\/swoopfunding.com\/ca\/knowledge-hub\/confidential-invoice-finance\/","title":{"rendered":"Confidential invoice finance"},"content":{"rendered":"\n
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\n \n What is confidential invoice finance? <\/a>\n <\/h5>\n <\/div>\n\n
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Invoice finance is a way of borrowing money using your unpaid invoices. If you\u2019ve issued invoices to your customers and these haven\u2019t yet been paid, invoice finance unlocks this money early. It\u2019s like a business loan<\/a>, but instead of using a physical asset like a building as security, invoice finance uses your accounts receivable.<\/p>\n

Invoice finance is a type of asset finance<\/a> that enables you to borrow money based on what your customers owe to your business (accounts receivable).<\/p>\n

Unpaid 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.<\/p>\n

Confidential invoice finance<\/a> is a suitable funding option if you prefer your customers to remain unaware that you\u2019re securing finance against their invoices.
\nConfidential invoice finance refers to forms of invoice finance that aren\u2019t disclosed to your customers. We\u2019ve already described invoice discounting, but confidential invoice factoring and CHOCs (Customer Handles Own Collections) are other examples of this type of finance.<\/p>\n

As you\u2019d expect from the name, confidential invoice finance refers to all invoice discounting and invoice factoring facilities that remain confidential<\/em> \u2013 your customers are not made aware that you\u2019re using invoice finance.<\/p>\n <\/div>\n <\/div>\n <\/div>\n

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\n \n Why choose confidential invoice discounting? <\/a>\n <\/h5>\n <\/div>\n\n
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Confidential invoice finance<\/a> is a suitable funding option if you prefer your customers to remain unaware that you\u2019re securing finance against their invoices.<\/p>\n

Confidential invoice finance refers to forms of invoice finance that aren\u2019t disclosed to your customers. We\u2019ve already described invoice discounting, but confidential invoice factoring and CHOCs (Customer Handles Own Collections) are other examples of this type of finance.<\/p>\n

If confidentiality is important to you, you might consider the three main types of confidential invoice financing:<\/p>\n

(Confidential) invoice discounting<\/a> – Invoice discounting is arguably the simplest form of invoice finance<\/a> \u2013 it\u2019s a way of borrowing money using your unpaid invoices. Invoice discounting is aimed at larger, established companies with a relatively high revenue, and is designed to finance your entire sales ledger (i.e. all of your invoices). It\u2019s usually confidential, so your customers and suppliers won\u2019t be aware of the arrangement.<\/em><\/p>\n

Confidential invoice factoring<\/a> – Confidential factoring is a type of invoice finance<\/a>. It offers the cash advance and credit control aspects of a normal factoring<\/a> facility \u2013 but with the confidentiality of invoice discounting<\/a>.<\/em><\/p>\n

Confidential CHOCs (\u2018Customer Handles Own Collections\u2019) – CHOCs (\u2018Customer Handles Own Collections\u2019) is a hybrid of invoice factoring<\/a> and invoice discounting<\/a>. It\u2019s a disclosed (non-confidential) facility, like factoring<\/a>, but with a CHOCs facility you continue to handle your own credit control, like invoice discounting.<\/em><\/p>\n <\/div>\n <\/div>\n <\/div>\n

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\n \n Is it suitable for an SME? <\/a>\n <\/h5>\n <\/div>\n\n
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Smaller businesses with a minimum revenue (e.g. from \u00a330,000) who want to keep their factoring arrangement confidential \u2013 some providers will work with new businesses.<\/p>\n <\/div>\n <\/div>\n <\/div>\n

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\n \n Have you also considered? <\/a>\n <\/h5>\n <\/div>\n\n
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Invoice discounting<\/strong><\/p>\n

Invoice discounting<\/a> 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.<\/p>\n

Invoice discounting is confidential, so your customers don\u2019t know you\u2019re using their invoice as collateral. Your company remains in charge of its own credit collection. It\u2019s also considered riskier so your lender may require evidence that your customers pay promptly and you have in-house capacity to chase outstanding payments.<\/p>\n

Invoice factoring<\/strong><\/p>\n

Invoice factoring<\/a> also lets bigger companies borrow money against their sales ledger, but it\u2019s different from 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.<\/p>\n

Invoice finance can benefit smaller businesses as it means they don\u2019t 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.<\/p>\n

Selective invoice financing<\/strong><\/p>\n

Selective invoice financing<\/a> 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 SMEs raise working capital if they have fluctuating cash flows, as borrowing against their sales ledger may not be cost-effective.<\/p>\n

Selective invoice financing comes in two forms: selective invoice discounting and spot factoring.<\/p>\n

Selective invoice discounting<\/strong><\/p>\n

Selective invoice discounting<\/a> works in the same way as invoice discounting, where a lender advances you money against outstanding invoices. The main difference is you choose the invoices you\u2019d like to finance rather than your company\u2019s whole sales ledger. As such, it\u2019s useful for companies seeking to borrow against invoices issued to a few big customers instead of a lot of smaller customers.<\/p>\n

Selective invoice discounting is also similar to regular invoice discounting because it\u2019s confidential, so it could be the right option if your company would prefer to hide from your customers that you\u2019re securing finance against their invoices.<\/p>\n

Spot factoring<\/strong><\/p>\n

Spot factoring<\/a> allows you to borrow money against specific unpaid invoices rather than your sales ledger, so it\u2019s 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.<\/p>\n

Spot factoring may suit SMEs that don\u2019t have the resources to chase outstanding payments and are happy to let a lender take the responsibility on their behalf.<\/p>\n

Confidential invoice finance<\/strong><\/p>\n

Confidential invoice finance<\/a> is a suitable funding option if you prefer your customers to remain unaware that you\u2019re securing finance against their invoices.<\/p>\n

Confidential invoice finance refers to forms of invoice finance that aren\u2019t disclosed to your customers.<\/p>\n <\/div>\n <\/div>\n <\/div>\n <\/div>\n \n