Pros & Cons of Invoice Financing

Jul 27, 2022

George Holmes

George Holmes

Managing Director + Co-Founder

Having cash tied up in invoices is no good for anyone, and a lot of businesses use invoice financing as a way to access this owed capital fast. With invoice financing, businesses can be paid up to 90% of the invoice value upfront, leaving only a small percentage with the customer to settle once their credit term is up. 

While it might sound like smooth sailing, invoice finance isn’t always appropriate for every business. Find out more about the pros and cons in this short article.

Advantages of Invoice Finance

Invoice finance is a way to inject cash into your business quickly, with very little risk. The main advantage of this financing option is that it provides opportunity for steady cash flow, allowing business owners to better manage their budgets, pay outstanding bills or start making plans for business growth. It also means that business owners can save time when it comes to chasing customers to pay their invoices. 

With invoice finance, some businesses worry about confidentiality. But, if the value of the invoice is high, many lenders will provide an option to keep your usage of invoice finance confidential. This means you can establish long-standing, trusting relationships with your customers and maintain full view and control of your accounts.

Invoice Finance at Aurora Capital

  • Specific to B2B businesses
  • Strengthen your ongoing cash flow
  • Advance up to 90% of your invoices on day 1
  • No fixed term
  • Fees between 1%-4% of the invoice value
  • Majority unsecured (some lenders will require a personal guarantee)
  • Get funding arranged within 48 hours

Disadvantages of Invoice Finance

As mentioned, there are options to keep your use of invoice financing confidential, but this is not always the case. Companies that are known to use third parties can sometimes be perceived as high risk by their customers, and this can lead to tarnished relationships and reputations. 

There is also the issue of fees. With so many business funding options out there, it can be easy to assume that fees differ very little between each available option. However, invoice financing is known as one of the more expensive solutions, and it’s important that businesses ensure there is full transparency with regards to terms before agreeing anything with a lender. 

At Aurora Capital, we’re passionate about ensuring our clients are fully aware of any risks they are taking when applying for finance. We can also guarantee that we only pair clients with reputable, suitable lenders of the very best value. To find out more about our secure and streamlined application process, get in touch directly. You can also start your invoice finance application today and secure a decision within days. 

Visit our Knowledge Hub for more information about invoice financing, how to apply and more!

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