ABOUT FACTORING & INVOICE DISCOUNTING (INVOICE FINANCE)
Invoice
Finance is the fastest growing form of working capital finance in
the UK.
In
1995 there were less than 11,000 companies using Invoice Finance;
today it is well over 48,000.
Many of the High Street banks will actively encourage their clients
to use Invoice Finance for their working capital needs and for obvious
reasons they will generally push the client to their 'in house' factoring
company. This may not necessarily be the correct move and it is always
best to obtain an alternative quote before making a final decision.
In any event, Invoice Finance can provide your business with significantly
more cash against your debtors than your bank will lend you.
There
are many versions of Invoice Finance but briefly:
FACTORING
will generally provide an immediate payment of around 85% of invoices
raised and submitted to the Factoring company. The Factor can provide
you with a credit control function and you can also take out insurance
against bad debts. Your customers will usually know that you have
factoring facility. Factoring is generally better suited to smaller
businesses.
INVOICE
DISCOUNTING
can either be disclosed to your customers or confidential. You can
receive up to 90% immediately of your approved invoices and in some
cases 100%. You will retain responsibility for your sales ledger
and credit control. You can also take out insurance to cover bad
debts.
SERVICE CHARGES
vary a lot, depending on the type of agreement and size of business
and can range from around 0.2% to 2% of turnover.
INTEREST
RATES
are similar to overdraft rates with a high street bank.
Most
industries can benefit from Invoice Finance for their working capital
needs. Until recently contracting and construction have been difficult
industries to raise Invoice Finance but there are now specialist lenders
who are happy to look at these companies and also those who have a
small number or even a single customer.
Exporters can benefit hugely from Invoice Finance and Importers can
link Trade Finance with either Factoring or Invoice Discounting.
"Helping
you get a better deal for your Invoice Finance"
