Invoice finance is a valuable financial tool for courier businesses looking to manage their cash flow effectively.
With invoice finance, courier companies can address cash flow challenges by receiving advances on outstanding invoices from a finance provider.
Instead of waiting for customers to pay their invoices, which can sometimes take weeks or even months, courier businesses can access a significant portion of the invoice amount upfront.
This infusion of cash allows them to cover operating expenses, invest in growth opportunities, and meet financial obligations without the constraints of delayed payment cycles.
In essence, invoice finance provides courier businesses with the flexibility and liquidity they need to maintain smooth operations and sustain their growth trajectory.
What is Invoice Finance for Couriers?
Invoice finance for couriers is a financial solution tailored to the specific needs of courier and logistics companies. It involves a process where a finance provider advances funds to a courier business based on the value of its outstanding invoices.
Instead of waiting for customers to pay their invoices, couriers can access a portion of the invoice amount upfront, typically around 80-90%. This infusion of cash enables couriers to maintain steady cash flow and address immediate expenses such as fuel, vehicle maintenance, and driver wages.
Once the customer pays the invoice, the finance provider releases the remaining balance, minus a small fee for their services. Essentially, invoice finance helps couriers bridge the gap between invoicing and receiving payment, ensuring they have the financial stability to operate efficiently and seize growth opportunities.
Types of invoice finance for Courier businesses
There are several different products on the market but typically they will be a type of invoice discounting or factoring.
Invoice Factoring – Invoice factoring for courier businesses is a finance facility provided by an invoice finance lender to help business owners leverage their unpaid invoices, giving them an instant cash injection into the business.
On payment of the invoice from their customers the lender will release the final amount minus any fees and charges. Factoring companies are always happy to support courier businesses by release up to 90% of a business’s invoices straight away.
Invoice Discounting – Invoice discounting for couriers is an invoice finance facility when a company’s unpaid invoices are used as collateral for a loan. Invoice discounting companies enable businesses to leverage the value of their sales ledger.
With an invoice discounting company, when sending out invoices to customers a proportion of the total amount becomes available from the lender, which provides your business with a source of working capital throughout the month while you wait for the payment of your invoice to be processed.
Benefits of courier funding
- This is a flexible working capital that will expand as your business expands
- For companies that meet the fundamental standards it can be much more freely available compared to a traditional bank account overdraft.
- Invoice finance could be divulged or confidential
- It can offer outsourced credit control as part of the solution
- By adding bad personal debt protection or credit insurance coverage it could protect your business against bad debts
- More cost effective and flexible compared to an overdraft.
Invoice Finance for a courier business costs?
Example say your business turnover £350,00 per year.
Service Fee= £350,000 x 1.65% = £5775
BDP= £350,000 X 0.7% = £2450
£350,000 – £8225 = £341,775
£341,775 x 80% = £273,420 x 4.5%/ 365 x 45 = £1516
Set Up Fee: £265
Total Cost = £10,006 per year without disbursements
Read more: How to start a courier business
Frequently asked questions
Should your courier company use factoring?
Your company should use invoice factoring when you routinely have a lot of invoices outstanding and your cash flow is suffering because of it.
Is Invoice Factoring a Business Loan?
Invoice factoring is not a business loan but a type of alternative finance which requires that a company has good paying customers and have outstanding invoices.
Is factoring invoices a good idea?
Invoice factoring works well for business owners that need money quickly, have reliable customers that have a history of paying invoices on time, and can afford the fees that come with selling invoices to a third party.
Does Invoice Factoring require security?
No invoice Factoring does not require security, your home or business premises will be safe should anything go wrong. Lenders may ask for a personal guarantee to be in place.
Need more information
Need funding for your courier business to fuel growth? Complete an online enquiry or simply contact our team at 01246 233108 to discuss tailored invoice finance solutions today!
Seasoned professional with a strong passion for the world of business finance. With over twenty years of dedicated experience in the field, my journey into the world of business finance began with a relentless curiosity for understanding the intricate workings of financial systems.