Are you looking for Invoice Finance for your business?
When it comes to invoices, we all know that some of your customers, clients, or connections will not get back to you straight away. So why should you be out of pocket for work you have already completed?
Especially when you need money to keep your business and company up and running.
So what can you do to resolve this issue?
With over 20 years experience in this sector we know the market very well and can find your business the perfect Invoice Finance solution. Whether you are new to Invoice Finance or whether you are looking to switch lenders we can assist. We work with all the major lenders in UK so we can find the most suitable funding solutions for your businesses.
How does Invoice Finance work?
Invoice finance is when a third party (lender) agrees to purchase your outstanding invoices up front in return for a fee. The lenders on our panel will provide your Business with up to 90% of the invoice value up front (less fees). After the debtor pays their invoice the remaining 10% is then sent back to you.
What is Invoice Factoring?
Invoice factoring is where a business sells its outstanding invoices to a third-party factor for immediate cash. The factor then collects payment from the businesses customers and returns the remaining balance, minus a fee, to the company. It’s used as a way to manage cash flow and get quick access to capital.
What are the advantages of Invoice Factoring?
The advantages of Invoice Factoring are:
Quick access to capital: Invoice factoring provides a quick source of cash by selling outstanding invoices.
Improved cash flow: By receiving payment for invoices upfront, companies can manage their cash flow and keep their business operations running smoothly.
Reduced administrative workload: The factor assumes responsibility for collections, reducing the administrative burden on the company.
Credit risk mitigation: By selling invoices to a third party, companies can transfer the credit risk to the factor and reduce the likelihood of bad debt.
Access to financing for growing companies: Invoice factoring can provide access to financing for companies that may not qualify for traditional bank loans.
Focus on core business: By outsourcing collections and reducing administrative tasks, companies can focus on their core business activities.
Improved negotiation power with suppliers: Improved cash flow from invoice factoring can provide companies with stronger bargaining power when negotiating with suppliers.
What are the disadvantages of Invoice Factoring?
The disadvantages of Invoice Factoring are:
Cost: Invoice factoring can be expensive, with fees that can range from 1-5% of the invoice value.
Loss of control: By outsourcing collections to a third-party factor, companies may lose control over their customer relationships and the way they manage their finances.
Reduced profitability: The fees associated with invoice factoring can reduce a company’s overall profitability.
Reputation risk: Involvement with a factoring company can be seen as a sign of financial distress and may damage a company’s reputation.
Limited flexibility: Invoice factoring is not suitable for all types of businesses and may not provide the flexibility that some companies need.
Contractual obligations: Invoice factoring contracts can be binding and may limit a company’s ability to manage its finances in the future.
Reduced privacy: By working with a third-party factor, companies may need to disclose sensitive financial information that can reduce their privacy.
What is Invoice Discounting?
Similar to Factoring however your business retains ownership for the credit control function and the collection of payments. The lender does not get involved with any credit control. This service is primarily undertaken on a Confidential basis without your debtor knowing that the Invoice has been funded.
What is the difference between Invoice Factoring and Invoice Discounting?
Invoice factoring and invoice discounting are similar financial services where a Business sells its outstanding invoices to a third-party for immediate cash. The main difference is in who is responsible for collecting payment from the company’s customers.
In invoice factoring, the factor assumes responsibility for collecting payment and handles all customer communication.
In invoice discounting, the company retains responsibility for collecting payment from its customers, and the factor simply provides a cash advance based on the value of the outstanding invoices.
Both services allow a company to get quick access to capital and manage cash flow, but the level of involvement with customers and the cash advance amount can vary depending on the service selected.
Switching Invoice Finance lenders. Why use a Commercial Finance Broker?
Expertise: Brokers have extensive knowledge of the finance market and can help companies identify the best financing options for their specific needs.
Time-saving: Brokers can save companies time by handling the application process and negotiating terms on their behalf.
Access to multiple lenders: Brokers have relationships with a wide range of lenders and can help companies access financing options that they may not have been able to find on their own.
Tailored solution: Brokers can tailor financing solutions to meet a company’s specific needs and requirements.
Improved terms: Brokers can negotiate better terms for their clients, such as lower fees or more favorable interest rates.
Objective advice: Brokers provide impartial advice and help companies make informed decisions about financing options.
Streamlined process: Working with a broker can simplify and streamline the financing process, reducing stress and uncertainty for the company.
Get in touch.
Invoice Finance FAQs
There are no charges to yourself as our fees are covered by the lender who you choose to work with.
The cost of invoice finance varies depending on several factors, including:
Type of invoice finance: The cost of invoice factoring is typically higher than invoice discounting, as it includes additional services such as credit control and debt collection.
Lender: Different lenders charge different fees for their invoice finance services. It’s important to compare fees and interest rates from multiple lenders to ensure you are getting the best deal.
Volume of invoices: The cost of invoice finance is often calculated as a percentage of the value of the invoices being financed. The more invoices a company finances, the lower the overall cost is likely to be.
Creditworthiness of clients: The creditworthiness of the company’s clients can affect the cost of invoice finance, as lenders may charge a higher fee for invoices from clients who are considered to be a higher risk.
Length of the contract: The length of the invoice finance contract can also affect the cost, with longer contracts often costing more.
On average, the cost of invoice finance can range from 1% to 3% of the value of the invoices being financed, with additional fees for specific services. It’s important to get quotes from multiple lenders and to carefully review the terms and conditions of each contract to ensure that you understand the full cost of the service.
We can usually source funding of up to 90% of you invoice value, however, this is subject to a due diligence of your debtor base and the credit worthiness of your business.
This depends on you. We can source the lenders very quickly. The lenders may require information to be provided and this is where you come in. The quicker the information provided the quicker the set up process will be. An average facility is usually put in place within a week or two.
We are able to source Invoice Discounting (No credit control), Factoring (with Credit Control) and Single Invoice Finance.
As there is an additional service of credit control you would expect Factoring to cost slightly more than Invoice Discounting.
There is no minimum turnover level, however, with the smaller levels of turnover this could restrict the amount of lenders who would be interested in providing funding. Just let us know what your turnover is and we can work with you to find a solution.
This is a question for the individual lender. For smaller facilities a PG is required for up to 30% of the borrowing limit. In the case of larger facilities the lender may ask you to sign a Fraud Undertaking instead of a PG.
The lenders which we work with transfer facilities on a regular basis. This makes the process very smoother than what it was years ago.
It has never been easier to transfer facilities and each lender will work closely with you to ensure as smooth transition.
We have lenders who are able to support up to 100% exporting if this is required. Get in touch and we can talk you through your options.
Yes we can. We have lenders who fund your Applications for Payments or Stage Invoices. These may attract higher charges from the lender due to the risk of the debt.
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