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Invoice finance and factoring

Looking to secure invoice cash flow for your business? Let our experts find the best solution for you.

KEY is a specialist in Invoice finance and factoring facilities.

An excellent method of funding for businesses, Invoice Finance is ideal for those who have an established trading history, preferably but not with an in house bookkeeper or accountant who really keeps on top of bookkeeping and invoicing systems.

The business “pledges” all invoices raised, by way of security to a lender. On a day to day basis, the business simply notifies the invoice finance funder of the amounts raised in customer invoices. When borrowing is required, the lender will make funds immediately available to a pre-agreed percentage of the total amount of all invoices raised (“the debtor book”). This percentage can be as much as 90% of the total debtor book, perhaps even more in some circumstances.

A high degree of trust in the business has to exist on the part of the invoice finance lender, as there are only very occasional checks on the value and type of invoices raised. Your customers are generally not made aware of the existence of the facility – hence it will be known as “confidential invoice finance”.

This type of funding is often thought to be the preferred way of funding your debtors, as invoice finance usually carries the benefit of:-

  • Anonymity with your customers (“confidential invoice finance”);
  • A minimum of reporting requirements to your lender;
  • Lower funding costs;

Factoring differs from confidential invoice finance, in so much as:-

  • In its purest form the factoring facility is disclosed to your customers (although it is possible to obtain “confidential factoring” – a hybrid of confidential invoice finance and factoring);
  • When seeking funds, you will have notify your factoring lender of the invoices raised on an item by item basis (although this can be automated through your bookkeeping system)
  • Your customers are asked to settle your invoices by payment directly to your funder, or to a trust account operated by your funder;
  • Your funder will often undertake your credit control on your behalf, which can mean that you may be able to reduce or avoid the cost of having to employ someone to do this for you.
  • You can obtain “single invoice” factoring arrangements, where you may have only one customer, or you only want finance against one of your customers.

Factoring is often suitable for you if you:-

  • Have a smaller business and/or;
  • Are less able to keep their bookkeeping systems fully up to date and/or;
  • Have a business which perhaps demonstrates a higher degree of risk to a lender’

Finally, it is worth noting that some of these invoice finance and factoring lenders will often extend other credit facilities to your business provided that you maintain the “core” invoice finance or factoring facility with them.  This can provided additional cash flow assistance if necessary – for example via stock funding or enterprise finance guarantee scheme.

There are over 50 lenders providing invoice finance and factoring services in the UK market. It is therefore essential to utilise an independent firm such as KEY to evaluate the options available, and ensure that you have obtained the best product and terms to match the unique needs of your business.

Please contact us today for a free initial consultation.

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