Top 15 most frequently asked questions

 

What is Invoice financing? It is an arrangement between a Invoice financier and a business whereby the Invoice financier provides between 75% and 90% cash available against the unpaid invoices of a business. It also relieves the burden of routine tasks such as sales ledger management, credit control and credit checking.

How can it help my business? Invoice financing can create immediate extra working capital, by advancing cash either the same or the following day against invoices. It also allows the client to concentrate on sales and production functions as the Invoice financier takes care of the credit control process.

Why would I need Invoice financing? If your business has inappropriate or inadequate financial facilities, a rapidly growing order book or suffers from late payment from debtors, Invoice financing could meet your cashflow requirements.

What is the difference between invoice discounting and factoring? Both facilities provide immediate cash against invoices. Invoice discounting is generally a confidential facility where the client continues to run its own sales ledger. An Invoice finance facility provides a full sales ledger and credit control service.

What is the difference between recourse and non-recourse Invoice financing? Invoice finance clients can protect themselves against bad debts with a non-recourse Invoice financing arrangement. The Invoice financier will cover the client for bad debt losses up to an agreed limit for each customer. With recourse Invoice finance any bad debt is the responsibility of the client. Naturally there is an additional cost to the client for non-recourse Invoice financing.

Are any types of businesses unsuitable for Invoice financing? Yes. Invoice financing can be used for a wide range of businesses offering goods or services on credit terms. However, some types of businesses such as those involved in stage payments or long-term contracts, as in the building industry, are sometimes unsuitable for Invoice financing.

What criteria must my business satisfy to be funded by Invoice financier? Invoice financing companies will require a minimum turnover but there is usually no upper limit. Start up businesses will be considered if they have a satisfactory business plan.

What security is required? Generally an Invoice financing agreement between the client and the Invoice financier covering purchase of debts by the Invoice financier, possibly in addition to personal guarantees/performance warranties is all that will be required. Occasionally a debenture over book debts or guarantees from associate/parent companies will be necessary.

Can I retain my banking facilities? Yes. Invoice financier may not disturb an existing banking relationship. However, it is likely that any existing overdraft facility will be reduced on the commencement of a Invoice financing relationship but the reduction will be more than compensated by the additional cash made available against invoices by the Invoice financier.

What about the relationship I have with my customers? While the Invoice financing company will be in direct contact with your customers, they may welcome your continued involvement in the collection process. In addition, an Invoice financing facility enables the client to enter into additional sales contracts with far more confidence.

How can I keep up to date with daily changes on my sales ledger? Daily transactions are advised on paper and some Invoice financiers provide a direct computer link between the Invoice financing company and the client who can view their own sales ledger movements as they happen. Any disputes are also notified to clients immediately.

Can you Invoice financier your exports? Yes. The Invoice financing company can collect your export debt whether they are invoiced in sterling or local currency. Most Invoice financiers, often use Invoice financing companies in the country of import, they have the ability to collect the debt in the local language of the debtor and understand the collection process and legal system for collecting debts. An additional charge is normally applicable on export debts.

What benefits will Invoice financing provide for the future prosperity of my business? Provides immediate working capital, helps to solve cashflow problems, provides headroom for growth and frees up valuable management time to enable a business to maximise its full potential and enhances ownership value.

Are there many providers of Invoice financing services? Yes. Well over 80.

How do I choose? We can assist you. Our service is Free of charge.