Top 10 UK invoice financing companies
As an Invoice Finance broker we are often asked who are the Top 10 Invoice Finance companies in the UK. This is a very hard question to answer as each lender in the UK has their own specialities and sector preferences.
With over 17 years experience in the Invoice Finance sector we know the market very well. We also know which lenders will be able to assist your business and who will be a great match.
Invoice Finance is most commonly known as Invoice Factoring or Invoice Discounting.
Does our business qualify for Invoice Finance?
Many businesses often question if they qualify for Invoice Finance. In simple terms nearly all businesses who sell to other businesses on credit terms will qualify.
At present there are over 50 UK providers of Invoice Finance which means there is a solution on the market for most circumstances.
Over the years Invoice Finance has become more and more flexible. This means that it has become a buyers market with lenders happy to adapt to the buyers needs.
We have built up a large panel of Invoice Finance provides who can support any business from a Start Up with a single invoice, all the way to a multi-million pound turnover business trading internationally.
What is the cost?
Again this is a difficult question to answer as it all depends on a number of variables.
There are two types of lender on the market.
- High Street Banks
- Alternative Lenders
The cheaper rates are provided by the High Street Banks, however, they do have some very strict qualifying criteria. High Street Banks also have a preference to larger well established businesses with a profitable history.
Alternative lenders offer the more flexible solutions and will consider all the applications which are not suitable for the High Street Banks. Alternative lenders are seen to have a greater cost than the High Street Banks.
Every lender will base their Invoice Finance costs on risk. This means that a new start up should not expect the same rates as a business trading for 10 years or more. Likewise a business with multiple CCJS or defaults should not expect to pay the same as a business with a clean credit history.
All Invoice Finance facilities are reviewed on a case by case basis. When we are working with our Clients we try our best to negotiate the best rates. We can usually obtain better rates than a Client going direct.
The Sales ledger
This is the key item which a lender will need to review to base their costs on. A lender likes to see a well spread sales ledger with many debtors. The sales ledger should also be ageing correctly as lenders do not like to see ledgers with debts which are past due.
A sales ledger with a single debtor poses a greater risk to a lender. The costs for a single debtor facility are often the highest. On the other spectrum a sales ledger with 200+ debtors would appear to lower the risk to the lender, however, a lender starts to see this as far too much work to manage. This again leads to an increase in cost.
When it comes to Invoice Finance, there are three main charges to consider.
- Service charge — This is the cost for the lender to provide the facility. This is usually charged as a small percent per invoice. As part of this cost the lender will provide Finance up front against the invoice. This is agreed at the outset and is usually around 85% up front (less fees). The remaining 15% is paid back to the business when the debtor remits their payment to the lender. The service charge may also include a credit control function (Factoring). The service charge is the key charge and should be no more than a maximum of 5% per invoice.
- Discounting charge — This is the cost for borrowing any funds which the lender makes available. This is usually charged on a monthly basis depending on what has been borrowed throughout the month.
- Credit Protection – In some instances a lender may include Credit Protection in their facilities. This is an additional service and therefore has an additional cost. Credit Protection offers some comfort to both the lender and the business should a debtor fail.
Will my debtors be aware if we are using a Factoring company?
Factoring involves the lender completing the credit control service on behalf of the business. This means that the debtor will need to be made aware of the involvement of the Factoring company.
In some instances Factoring can be completed on a confidential basis. This involves the lender chasing for payment under the name of your business. This service is growing in popularity as it appears that the business has it’s own credit control department.
If you are worried about your debtors knowing about the Business Factoring then either consider Confidential Factoring or consider Invoice Discounting where you are responsible for chasing your own debts.
Invoice Discounting works exactly the same as factoring apart from one different. This difference is that you are responsible for chasing your own debts.
As you are responsible for chasing your own debts the facility technically becomes confidential. The involvement of the lender is not disclosed at all to your debtors.
As the facility does not include a credit control function this leads to a far cheaper facility.
If your business can manage it’s own credit control then Invoice Discounting is the better funding solution for your business.
How to choose the best Invoice Finance UK company for my business?
Many businesses find the search for a new Invoice Finance lender very daunting. There are so many choices on the market and each lender has different fees and sector preferences.
We often see businesses approaching their accountant or other businesses for advice. This is fine to an extent but every business is different and knowing the market is key to success. Just because one lender works for one business does not mean it will work for yours.
Why use a Broker?
The key reason to using a broker is because we know the market. We have regular meetings with lenders and keep up to date with market activity.
Every lender is different and knowing which lenders will support a business can save a lot of time.
As a broker we can also negotiate better rates on behalf of the business. This is because lenders want to work with brokers as they see this relationship as pivotal to their success.
The main reasons to using a broker like All Star Funding Solutions is that we offer a completely free service to the business.
We do not charge any fees at all as we are paid by the lender for a successful introduction. This means that if we can’t find you the right facility at the right price then we don’t get paid. It is therefore in our interest to get you the best deals on the market.
Finally if you would like to speak with us please call 0161 8211478 or click the link below.
As members of the Financial Intermediary and Broker Association you can be assured of a great service. https://www.fiba.org.uk/