For UK-based haulage businesses, cash flow can often feel like a juggling act. With typical customers taking up to 45 days to pay invoices, it’s no surprise that many haulage companies face cash flow pressures. This is where invoice finance can be a game-changer, providing immediate access to funds and allowing businesses to stay ahead of expenses and grow without waiting for clients to pay. Here’s how it works, step by step.

What is Invoice Finance?

Invoice finance is a financial service that allows businesses to unlock cash tied up in unpaid invoices. Instead of waiting weeks or months for payment, a haulage company can receive up to 90% of the invoice value upfront from a finance provider. When the client pays the invoice, the haulage business receives the remaining balance, minus a small fee for the service.

Let’s break down the process using the example of a haulage business with customers who typically pay 45 days after invoicing.

Step-by-Step Guide: How Invoice Finance Works

Step 1: Business Delivers a Service and Issues an Invoice

• When: Day 0
• What Happens: The haulage business completes a job for one of its business clients, such as transporting goods from one location to another. Once the job is done, they issue an invoice to the client, which is due to be paid within 45 days.

Step 2: Submit the Invoice to the Invoice Finance Provider

• When: Within a day or two of issuing the invoice
• What Happens: Instead of waiting the full 45 days, the haulage business submits the invoice to an invoice finance provider. Many providers allow businesses to submit invoices online through a client portal, making it a quick and straightforward process.
• Tip: Choose a finance provider that understands the haulage sector, as they’ll be familiar with the nuances of cash flow in the transport industry.

Step 3: Receive Upfront Funding (Up to 90% of Invoice Value)

• When: Usually within 24 to 48 hours after submitting the invoice
• What Happens: The finance provider reviews the invoice and, if approved, advances a percentage of the invoice value to the haulage business. This amount is typically up to 90% but may vary depending on the provider and the business’s credit profile.
• Example: For a £10,000 invoice, the provider might advance £9,000 (90%) upfront, giving the haulage company quick access to essential working capital.

Step 4: Business Uses the Funds to Cover Expenses

• When: Immediately after receiving the funds
• What Happens: With funds in hand, the haulage business can cover operational costs, such as fuel, driver wages, vehicle maintenance, or other expenses needed to keep the business running smoothly.
• Benefit: By accessing cash immediately, the haulage company doesn’t have to wait or use expensive short-term credit to manage day-to-day expenses.

Step 5: Customer Pays the Invoice

• When: Around 45 days after the original invoice date
• What Happens: The client, who has a 45-day payment term, pays the invoice amount directly to the invoice finance provider. Alternatively, in some agreements (such as confidential invoice discounting), the customer may pay the haulage company, which then forwards the funds to the finance provider.

Step 6: Business Receives the Remaining Balance Minus Fees

• When: After the invoice is fully paid
• What Happens: Once the finance provider receives the full payment from the client, they deduct a small service fee (typically 1-3% of the invoice value). They then release the remaining balance to the haulage business.
• Example: For a £10,000 invoice, with an advance of £9,000, the haulage business might pay a 2% fee (£200), receiving the final £800 once the client has paid in full.

Benefits of Invoice Finance for Haulage Businesses

1. Improved Cash Flow: Haulage businesses often face ongoing costs, from fuel to payroll. Invoice finance ensures a steady cash flow, making it easier to cover these expenses.
2. Fast Access to Cash: With most finance providers, funds are available within 24-48 hours, providing near-immediate liquidity.
3. Scalable Financing: As the haulage business grows and issues more invoices, the amount of financing available also increases, making it a scalable solution.
4. Reduced Reliance on Traditional Loans: Unlike traditional bank loans, invoice finance relies on the value of invoices, not the business’s credit score, and doesn’t add long-term debt.

Types of Invoice Finance

Haulage businesses may find that different forms of invoice finance work better for their unique needs:

• Invoice Factoring: In this setup, the finance provider takes on the responsibility of collecting the debt from customers, which can save the haulage business time.
• Invoice Discounting: The business retains responsibility for collecting customer payments, and clients are often unaware that a finance provider is involved.

Is Invoice Finance Right for Your Haulage Business?

Invoice finance is ideal for businesses with long payment terms and high upfront costs, making it a great fit for haulage companies that need to bridge the gap between completing jobs and receiving payment. The predictable, quick access to funds makes it easier to manage cash flow, invest in growth, and cover operational costs without added debt.

If you’re ready to take control of your cash flow and avoid the long wait for client payments, invoice finance could be the right solution for your haulage business. Reach out to a finance provider to explore options and find a service tailored to your needs.