Selective Invoice Finance is a hybrid type of invoice finance
Whereas with the traditional types of invoice finance you will borrow against all or the majority of your sales ledger, this product allows you to only commit certain customers to the facility.
As an example, if you had ten customers, but only two who paid on slower terms, you could simply commit the two slower paying customers to the facility, and exclude the eight who pay well.
Compared to the more traditional products, Selective Invoice Finance is more flexible and is becoming more popular as it is very easy to use. It can be slightly more expensive than Factoring and Invoice Discounting, as you will be putting less through the facility itself.
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How it Works
Instead of borrowing against all customers on your sales ledger, you would only choose those you want to fund and commit them to the facility. Once you commit a customer to the facility, you must give all invoices for that customer to the selective invoice finance lender. You will receive two payments from the lender. The first payment will be the initial bulk payment against the total invoice value, known as the pre-payment percentage. The second payment is the remainder of the invoice, minus the agreed upon fee. This is the residual balance. Your customer will pay the lender back directly. The basic steps of Selective Invoice Finance are below:
- Initially, you will submit the invoices you would like to fund to the selective invoice finance lender.
- Once the amount of funding available per customer is agreed, the lender will do a verification with your customers.
- Once the invoice is verified, your selective invoice finance provider will advance the funds to you.
- Your selective invoice finance provider chases your customer for payment of the invoices which they have advanced funds against.
- Once payment has been made by your customer to the lender, you will receive the remaining balance of the invoice, minus the agreed upon fee.
To see your Selective Invoice Finance options, use our FREE quote form.