1. Selection: The business chooses one or more invoices they want to finance. These invoices represent the outstanding payments from their customers.
2. Application: The business submits the selected invoices to the invoice finance provider for approval. This normally happens via the lenders portal and is incredibly simple.
3. Verification: The finance provider conducts due diligence on the invoices and the creditworthiness of the customers who owe the money.
4. Advance: Once approved, the finance provider advances a percentage of the invoice’s value to the business, usually ranging from 80% to 95%, depending on the specific agreement.
5. Payment: The finance provider takes responsibility for collecting payment from the customers on the selected invoices.
6. Final Payment: After the customers pay the invoices, the finance provider deducts their fees and charges, and any advanced amount not initially paid to the business. This fee is normally a simple bundled fee making it one of the simplest forms of finance. The remaining portion of the invoice, minus fees, is paid to the business.