Invoice factoring involves selling your invoices to a lender who then manages the collection process from your customers. With invoice discounting, you borrow money against your invoices but retain control over collecting payments from your customers. Factoring is typically more visible to your customers, while discounting can be confidential.

The cost of invoice financing typically includes a discount fee (similar to interest) and a service fee. These costs can range from 1% to 5% of the invoice value per month, depending on factors such as your business's creditworthiness, invoice volume, and the specific terms of the financing agreement.

In many cases, yes. Some invoice financing arrangements allow you to select specific invoices to finance, giving you flexibility in managing your cash flow. However, some lenders may require you to finance all invoices or maintain a minimum volume of financed invoices.

This depends on the type of invoice financing you choose. With invoice factoring, customers are usually aware as they'll be instructed to pay the factoring company directly. Invoice discounting, on the other hand, can often be arranged confidentially, with customers continuing to pay you directly.

The outcome depends on your agreement with the lender. In some cases, particularly with recourse factoring, you may be required to buy back the unpaid invoice or replace it with another. With non-recourse factoring, the lender assumes the risk of non-payment, but this typically comes with higher fees.

While invoice financing is available to many industries, some lenders may be hesitant to work with businesses in high-risk sectors or those with primarily consumer (rather than business) customers. Industries with long payment terms or frequent disputes may also face challenges in securing invoice financing.

Setting up an invoice financing facility can be relatively quick, often taking between a few days to a couple of weeks. The exact timeframe depends on factors such as the complexity of your business, the lender's processes, and how quickly you can provide necessary documentation.

Yes, new businesses can often use invoice financing, although terms may be less favorable than for established companies. Lenders will typically look at your customers' creditworthiness rather than your business history. However, you'll usually need to have at least some trading history and existing invoices to finance.

The impact on your balance sheet depends on the type of invoice financing. With invoice discounting, the arrangement often appears as a loan on your balance sheet. Factoring, however, may allow you to remove the invoices from your balance sheet entirely, potentially improving your debt-to-asset ratio.

In many cases, yes. However, existing loans may affect your eligibility or the terms you're offered for invoice financing. Some lenders may require consent from your existing creditors, or your current loan agreements may have covenants restricting additional borrowing. It's important to review your existing loan terms and discuss your situation with potential invoice financing providers.