Keeping cash flowing is the most important part of any business. Invoice Finance enables you to do this by releasing cash tied up in outstanding invoices, giving your business an immediate cash injection and on-going supply of cash that grows in line with your sales. Whether you are a small start up business struggling with working capital, or a larger organisation looking for a cash boost to fund expansion plans. If you are trading on credit terms within the business to business marketplace, then Invoice finance is for you.
Factoring;
Is ideal for smaller businesses without an established accounts team or those who want the benefits of a funding and collections service. As well as providing the finance, the funder will manage your credit control, chasing and collecting outstanding invoice payments on your behalf.
Discounting;
Is a funding only solution more suited to businesses with a credit control function in-house. The funder provides the finance, but you remain in control of collecting payments.
Key Benefits; Quickly unlock cash due to the business, no extra funding or loss in equity.
A secure form of finance as the sales ledger is used to secure access to funds.
Improve your profit-paying suppliers early lets you buy in larger quantities and take advantage of any volume discounts available.
How does it work; You simply send your invoice to your customer and a copy to the funder.
Factoring facility- The funder will undertake credit control on your behalf.
Discounting facility- You chase payment of the invoice and your customer makes payment into a dedicated business account which is controlled by the funder.
On receipt of your invoice, the funder will advance an agreed percentage of the value (generally within 24 hours)
Once customer pays in full, the remaining percentage is returned to you minus a fee.
What it costs;
Fees are based on the level of support required and when compared with other sources of finance, Invoice Finance can be a cost effective way to fund your business. Some funders have additional fees, known as disbursements. It is important to be aware of when these fees will apply as this could increase the cost of your facility significantly. But it can also save you.
Selective Invoice Finance;
Unlike ”whole turnover” financing, Selective Invoice Finance allows you to choose which invoices or debtors should be put forward for funding. You can then choose when and how much you wish to draw from the selected invoices and you are only charged a percentage on the monies drawn, calculated daily. This is a great option if you are looking for flexibility as you are not tied to a contract and can dip in and out of the facility.
When considering whether the above is right for your business it is very important to understand how the facility will work once up and running.
At Key Commercial Finance Solutions Ltd we have a team of consultants who can explain the process and search the market on your behalf to secure the best facility for your business needs. Please contact myself or the Key team on the below and we will be more than happy to assist.