BlogWhat is Invoice Financing? Is it a real alternative for Small Businesses?
Invoice financing lets a small business borrow against its own accounts receivables rather than selling invoices to a factor, so you keep control of collections, but if your customer never pays you still owe the financier. Cloudfloat takes that risk on itself instead, extending payment terms to your customer while you get paid straight away. We call it buy now pay later business finance.
We take the risk so you don't have to!
Similar to Invoice Factoring, instead of selling invoices to factoring companies, small businesses with unpaid invoices can also use invoice financing to borrow against their own accounts receivables.
There are some differences to consider – When you use invoice factoring, you are essentially selling or re-assigning invoices to a third party company: the factor. The factoring company takes over the communications with your clients about their invoice, and the factor is the one processing the payment. With invoice financing, instead of having your clients direct their invoice payments to the factor, your clients will continue to direct their payments to you, just as they would before you initiated invoice financing. This is an important point because with invoice financing, you remain in control of the sales ledger, collections, and invoice processing. From a risk perspective, if your customer doesn’t pay their invoice, you are still required to pay the financier.
With Cloudfloat, we do things differently. Cloudfloat takes the risk away from your core business and takes on the risk ourselves. We extend payment terms to your customer. Your Customer pays via Cloudfloat and you get paid cash in the bank straight away improving your cashflow. Your Customer pays us over time.
Cloudfloat does not provide a factoring service nor does it finance or factor any of your invoices. We help to get your invoices paid immediately. We provide a quick and easy way for your customers to recieve payment terms whilst you get paid now. We call it buy now pay later business finance.
Common questions
With factoring you sell or reassign invoices to a third party, which takes over communication with your clients and processes their payments. With invoice financing you borrow against your own receivables, clients keep paying you, and you stay in control of the sales ledger, collections and invoice processing.
With invoice financing the risk stays with you, because you are still required to pay the financier even if your customer does not pay their invoice. Cloudfloat takes that risk away from your core business and carries it itself.
Cloudfloat does not finance or factor invoices. It extends payment terms to your customer, who pays Cloudfloat over time, while you get cash in the bank straight away, improving your cash flow. Cloudfloat calls this buy now pay later business finance.