New to invoice finance? Then you might be surprised at how effectively a flexible invoice finance arrangement can ease your cashflow and working capital problems. A factoring facility draws cash quickly into the business by converting your debtor book into an immediate source of revenue. The security for the advance is the face value of the outstanding invoices.
The three main types of invoice finance are:
Invoice factoring improves business cash flow by allowing it to sell its unpaid invoices to an invoice finance company (IFC). Subsequently, every time the business sends an invoice to a customer the IFC advances part of the value of that invoice upfront. The amount advanced is typically 70 – 85% of the face value of the invoice.
When a factoring agreement is in place, the IFC takes full control of the client’s sales ledger. They will also set credit limits and chase late paying customers directly. A factoring facility is not confidential since the client’s customers will know that their supplier is factoring their outstanding debts. Factoring is the most widely used form of invoice finance.
Invoice discounting is similar to factoring except that the client continues to administer their own sales ledger. This type of facility can, therefore, remain confidential. Invoice discounting is usually only available to larger companies as they must be able to demonstrate to the IFC that they can administer their own sales ledger efficiently. However, if there are too many overdue invoices, then the IFC may insist that a factoring facility is more appropriate as this enables the IFC to take control of invoice collection and reduce the percentage that is overdue.
Spot factoring is for clients who need to raise intermittent funding, often on a seasonal basis. Instead of a whole ledger facility, an IFC will make funds available against just one or more specific invoices. As with factoring the IFC checks the invoice and then advances a percentage of the invoice face value. The advance is again typically 70-85% but can be less in some industry sectors. When the customer finally pays the invoice, the IFC will pay the balance due to the business, minus the fees it charges for the service.
No matter what the age or size of your business, we can typically provide a workable and cost-effective factoring solution to improve your business’s cashflow. Furthermore, the rates are often lower than bank overdraft terms.
Key benefits of a factoring solution include:
- Up to 85% of the invoice value paid to you as soon as you raise an invoice
- On-line process with cash paid into your account the same day or next day
- Facility available to new start business with a turnover above £100k per year
- Bad debt insurance can be included, if necessary, to give additional peace of mind
- Most B2B businesses can make use of factoring and invoice finance
- Reduced finance costs compared with traditional overdraft facilities
- Easy to set up, service can be operational within 7 – 10 working days
At Fusion Finance we offer free, uncomplicated and unbiased advice and will tailor an invoice finance solution to meet your exact needs and budget. We provide a fast and efficient service, which is vital at a time when more and more businesses are finding that they have to look beyond the traditional bank overdraft to satisfy their cashflow needs. We will provide you with a view of the entire market and can implement a factoring solution with the minimum of disruption to the running of your business.
There is an ever-growing range of invoice finance solutions available to borrowers. The challenge is to find the product that best suits your particular needs and circumstances. That is precisely where the services of a specialist broker such as Fusion Finance can make all the difference. Firstly, we bring expertise along with access to the wider lender market including private banks and funds. Secondly, we aim to find you the best funding for your particular circumstances. Finally, our help and advice are impartial, in confidence and given without obligation.
Please contact us today to see how we can help you or submit an email enquiry, and we will get back to you.
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