Factoring And Invoice Discounting Finance

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Invoice & Trade Finance

Having access to the appropriate level of working capital is essential for any business, and particularly so for a startup or a growing business.

Many businesses will have much of their cash tied up in their sales ledger. Invoice financing is a means of accelerating payments from debtors and turning invoices into immediate cash. In essence an invoice finance facility provides a prepayment of up to 80% of the sales invoice value, with the balance released once the customer pays.

Invoice Finance can take three forms:

  • Factoring - here finance is provided against the sales ledger as described above, together with the benefit of the Funder also managing the day to day administration of the sales ledger.
  • Invoice Discounting - again cash is provided up front against invoices, but here the business retains control of the sales ledger.
  • Trade Finance - some Lenders will advance funds against confirmed orders to allow the business to buy the stock to deliver to its customer. This facility can be used in a situation where a company lacks sufficient funds to purchase the supplies needed to fullfill an order and does not have sufficient standing with the supplier(s) to obtain credit terms or has been refused a bank overdraft.

Now however there is another option, a variation on Invoice Discounting. This is Selective Invoice Discounting. There are a number of Lenders who now provide this service, including some Crowd Funding Platforms. Essentially what they do is to offer an invoice discounting facility on one or perhaps a group of Invoices without the Borrower having to agree to put all of their invoices through the scheme. This can offer a very useful and flexible solution to those requiring only a short term boost to their cash flow. For more details on this just call us on 01327 349 779 and we will be happy to explain.

Trade Finance

Under the first two of these services funds are released to the business' bank account as soon as an invoice has been issued to the end user. Access to the Funder is usually via a user friendly internet-based facility which allows new invoices to be uploaded and checks to be made on available funds. Funding can be arranged from as little as £25,000 and across a wide variety of sectors. Invoice Finance is even available to business sectors that are often overlooked. Examples include care homes, training establishments and dispensing surgeries, all of whom can suffer from delays in Local Authorities paying invoices. Construction and contracting businesses too can often struggle to source appropriate working capital facilities. There are a limited number of funders for these sectors and we have access to them for our clients!  

So if you operate in either a mainstream business sector or one of these specialist sectors and would like to know more about the possibilities offered by invoice finance or trade finance then call us for more details.