Freight Forwarding Invoice Finance for Pass Through Costs and Disputes

They may be considered, but the provider will want to understand how those charges arise and whether they are properly supported by the contract and the shipment documents. If the debtor is likely to dispute a pass through cost or a duty related charge, that can affect eligibility. The invoice needs to be assessed as a receivable, not just as a total amount on the page.

Factoring normally includes collections, so the funder or its service partner handles debtor chasing and payment administration. Discounting normally leaves credit control with your business, so you continue to manage customer relationships directly. The right choice depends on how much control you want to keep and how your customers expect to be contacted.

Not always, but they do make the position more complicated. A provider may look at whether the dispute relates to the whole invoice or just one part of it, whether the disputed amount can be separated and whether the remaining receivable is still clearly due. The more unresolved the charge is, the less likely it is to be treated as a straightforward eligible invoice.

No. Availability does not automatically grow with turnover. Providers also look at debtor quality, concentration, invoice validity, dispute history, contractual terms and the way the ledger is managed. A business with higher turnover can still face restrictions if its invoices are concentrated, poorly documented or often queried.

Your own credit is relevant, but it is not the only factor. Invoice finance is heavily shaped by the quality of the debtor and the receivables themselves. If the customer is weak, the paperwork is incomplete or the invoice is disputed, a strong applicant profile will not necessarily overcome those issues.

Not automatically. A lender or broker will usually assess which invoices are eligible, whether the debts are to business or public sector payers, and whether any part of the invoice is excluded by dispute, retention style terms or contractual set off rights. In practice, freight forwarding facilities are usually built around specific receivables rather than every item raised.

In factoring, the provider normally manages your sales ledger and collects payment from customers. In invoice discounting, your business normally keeps its own credit control, and customers pay into an account controlled by the provider. Discounting generally needs stronger internal controls and reporting.

Each provider sets its own advance rate for each facility, based on its assessment of your customers and ledger. There is no universal figure. The advance applies only to invoices the provider treats as eligible.

Providers typically focus on the creditworthiness of the customers paying your invoices. Your business's own credit profile may therefore carry less weight than it would for a traditional business loan, but it is not ignored. Providers still review your financial position, customer payment history, overdue invoices, customer concentration, disputes, credit notes and contract terms. Expect to be asked for aged debtor and creditor reports, accounts, management accounts and sample customer terms. Exact requirements are provider-specific.

Under factoring, customers will usually know because the provider collects payment. Invoice discounting can be arranged on a confidential basis, but only where the provider agrees, and confidentiality can be withdrawn under the facility terms, for example if the provider needs to collect directly.

Most facilities are with recourse: if an invoice remains unpaid beyond the agreed period, you must repay the advance or the provider deducts it from other funds due to you. Protection against a customer’s insolvency is only included where separately agreed, usually at extra cost and subject to limits.

Many facilities cover the whole ledger. Some providers offer selective or single-invoice arrangements that fund chosen invoices or customers. Whole-ledger facilities and selective facilities are priced and structured differently, so compare like with like.

Compare the service fee and any annual minimum, the discount charge and its reference rate, set-up fees, audit and ancillary charges, minimum usage terms, the minimum contract period and termination fees. The headline advance rate alone does not show the total cost.

Advances are usually settled from your customers’ payments into the collection account. The provider then deducts its charges from the retention and releases the balance to you. Timing of releases depends on the facility terms.

Some providers will fund export invoices or invoices in other currencies, subject to their criteria for overseas customers. Invoice finance does not by itself protect you from exchange rate movements between invoicing and payment; currency risk should be considered separately.

The advance is the invoice multiplied by the advance percentage. The discount charge is the annual rate applied to the chosen basis (the advance or the full invoice) for the days outstanding on a 365-day year. The service fee is a percentage of the invoice. The retention released when your customer pays is the invoice less the advance and charges deducted at settlement. All figures are illustrative.