Invoice Finance,Factoring,Invoice Factoring,Invoice Discounting,Receivables Finance all end in the same result.A lender providing funds against an invoice to improve your working capital.All these descriptions can mean the same service but are two separate products;also there is one in between!
They have different criteria and more importantly for you costs.We’re here to guide you towards the most suitable invoice finance lender for your requirements.
There are a few initial criteria lenders insist upon.
- You must be trading business to business
- Strong proof of debt – usually in the form of signed delivery notes or time sheets
- An invoice must be raised
- Start up companies
- Turnover less than £500,000
- Low balance sheet value
- Outsourcing of all invoicing
- Established businesses
- Turnover above £500,000
- Retain credit control
As well as profitable businesses f your credit is poor or have a history of insolvency then invoice finance is still a viable finance option for your business.
Three types of invoice finance companies
This is usually your first contact although it is not necessarily the best. We’ve all heard of “don’t have all your eggs in one basket” and we have come across many businesses who have had problems with their main banking due to also having their factoring line with the same bank.
With any factoring company you will have your own client manager and with a bank typically they will have 150 similar clients to yourself to look after. By way of contrast an independent lender will have approximately 25 clients per manager. For some businesses this is not an issue but if you require a manager who understands your business and speak to them on a regular basis; which would you prefer?
You are also dependent on the financial standing of the bank and if there are problems within that organisation they will be less flexible than an independent.
Independent but rely on banks for their money
These companies borrow from their banks for which they will be charged fees and interest. They then add their profit margin to these costs and so can be more expensive than the independent lenders who obtain their funds from their own resources.
The main advantage is that they will be separate from your main banking and typically they will have less clients to manage than a bank.
Independent with their own money
Usually the lowest cost option with less clients per manager. More flexible when you require a change in your facility or additional help. These range from very small companies to multi-billion pound international lenders.
We will identify the best lender for your circumstances and outline what is good and what isn’t, so you are aware of all the potential issues that could arise.