Small business owners don’t need to rely on bank loans, credit cards or overdrafts to borrow money. An alternative funding option lets you release money from invoices still to be paid by your customers. Invoice finance, provided by firms like Aldermore, is a method of business funding that’s been around for a while now, and provides quick access to extra cash.
What's the difference between invoice factoring and invoice discounting?
Aldermore offers 2 types of invoice financing – both are convenient ways of getting your hands on money without having to hand over equity to investors.
Invoice factoring – Businesses can ‘sell’ unpaid invoices to Aldermore and, in return, receive up to 90% of the total value. The lender also collects payments on outstanding invoices on your behalf, saving you the time and effort chasing customers.
Invoice discounting – Again, Aldermore provides small businesses with up to 90% of the value of invoices, but in this case, the firm doesn't do the chasing. This type of finance can be confidential so your customers don’t need to know you’re getting additional funding.
Whether you opt for factoring or discounting, you get the rest of the value of your invoices when customers have paid, minus the fee charged by Aldermore.
Who can use Aldermore invoice finance?
So, now we're clear about the differences between these 2 areas of finance (and it’s only a slight difference), let’s take a look at the kinds of businesses Aldermore invoice finance is suited to.
You need to be generating invoices through the sales of products or services, and you should have an annual turnover over £250,000. SMEs operating in areas including recruitment, transportation, business services, import, manufacturing and wholesale can benefit.
It’s a viable alternative to other types of business lending. However, if, for the moment, you prefer to keep your options open, read about our broad range of other finance providers including pension-led funding and specialist small business lenders.
Now is a fantastic time to be an entrepreneur, despite the doom and gloom around the reduction in bank lending. Whether you’re starting up or growing your enterprise, there’s a finance option for all SMEs, at any life stage.