Why does invoice factoring incur higher charges?

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Invoice factoring is costlier to businesses than invoice discounting is because it includes professional credit control and collection services.

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What charges do invoice finance arrangements incur?

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Service charges for invoice finance facilities can be flat monthly costs, or a percentage of the turnover of businesses, dependent upon individual circumstances and requirements. Invoice discounting typically incurs charges of less than 1% of business turnover, whilst invoice factoring typically incurs charges of between 0.75-2.5% of business turnover.

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The interest charges paid on initial cash advances before customer payments have been received are calculated in much the same way as interest on bank overdrafts.

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What does asset based lending entail?

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Asset based lending generates working capital against assets other than debtors lists, such as stock, property, plant, and machinery. It has become an increasingly popular and well respected method for both business and funders.

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What does invoice discounting entail?

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Invoice discounting does the practically identical job as invoice factoring, by unlocking cash tied up in debtors lists. However, invoice discounting does not include credit control and collection services, and is usually offered to businesses that already have their own internal people and procedures in place to secure timely customer payments.

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Invoice discounting largely generates cash payments of up to 85% of customer invoice totals for businesses. Customer payments are made in to bank accounts that are administered by invoice discounting companies. Upon customer settlement, businesses are paid the remaining amounts, less service and interest charges.

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What impact does invoice factoring have on customer relationships?

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With the right invoice factoring company in place, there should be absolutely no adverse effects on the relationships between businesses and their customers. As far as customers are concerned, it is an outsourced function. It is of imperative importance that businesses choose invoice factoring companies wisely, as heavy handed and over zealous credit control can cause customer disgruntlement, and even business loss.

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What does invoice factoring entail?

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Invoice factoring comprehensively resolves the issue of lack of working capital due to outstanding customer payments. It can additionally offer bad debt protection.

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As soon as businesses raise customer invoices, the invoices are, in effect, sold to factoring companies, who pay businesses between 80-85% of the invoice values.

Businesses receive balance payments from factoring companies, with service charges and interest automatically deducted, when factoring companies receive customer payments.

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Furthermore, factoring companies carry out credit control and collection on the behalves of businesses. This results in substantial administrative savings to businesses, plus lower interest charges, due to reduced borrowing terms resulting from faster customer payments. Appropriate customer credit terms are pre-agreed between businesses and factoring companies, in order to avoid adverse effects to the ongoing relationships between businesses and their customers.

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Do invoice finance companies offer the same services?

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The services provided by various invoice finance companies can differ dramatically, as they offer varying experience levels, price structures, products, and specialist sectors. We believe that our services are rounded, due to the importance we place on intrinsically understanding businesses and funders alike. Our expertise and professionalism ensure win:win business and funder matches.

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Is invoice finance really just a fancy term for a last resort?

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Invoice finance has nothing to do with last resorts. On the contrary, the cash flow that invoice finance provides contributes to enhanced business prosperity. Businesses seeking to use invoice finance as last ditch survival tactics are largely turned down.

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Why do businesses go down the invoice finance route?

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Businesses opt for invoice finance in order to transform their debtors lists in to ready cash. It is the norm for debtors lists to be the greatest assets that businesses have. Yet, whilst their monies owing might make for pretty reading on paper, working capital is hampered until customer payments convert spreadsheet figures in to cash in hand. Invoice finance generates immediate cash as soon as customer invoices are raised, resulting in the availability of optimum amounts of timely money.

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What does invoice finance mean?

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Invoice finance in the umbrella term for the generation of cash against the value of debtors lists, or outstanding customer invoices. Both invoice discounting and invoice factoring sit under this umbrella.

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Why are online quotes not available?

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We consciously steer clear of offering online quotes, as they are realistically impossible to determine. Our services are superior due to the time we invest in getting to know businesses and understanding their business finance needs. This ultimately enables us to make the most befitting matches with funders. Our in depth process does not allow for instantaneous quotes that can be automatically calculated online, yet are potentially inaccurate.

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How much do broker services cost?

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To the businesses that use us, our broker services cost nothing. We are able to offer our services on a complimentary basis, as we make our money on the introduction commissions we earn from funders.

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Why do businesses not simply go direct?

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Businesses wisely save themselves time, hassle – and potentially unwise deals – when entrusting their needs to specialist professionals. It is important that businesses therefore select the right professionals to work in partnership with. When undertaking the selection process, businesses should be aware that some invoice finance companies are obliged to deal within the confines of their own product ranges. This can result in deals that are great for their companies, but not necessarily the best possible options for businesses.

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Why do businesses use the services of brokers?

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Businesses use the services of brokers in order to generate working capital and promote healthy cash flow, whether they are new start ups, they need cash injections to use towards restructuring, or they are dissatisfied with the services they receive from other providers.

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The reasons why businesses use the services of brokers also begs the further question – why do they use our services in particular? A large contributor to our success lies in the fact that we recognise that all businesses, and their commercial finance concerns, are completely unique. We are independent, have vast amounts of industry expertise, and enjoy direct access to the entire marketplace of funders. These combined elements give us an outstanding competitive edge in terms of our ability to quickly and efficiently make the best possible business and funder matches.

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