Introduction
You know you want an invoice factoring facility to help with cash flow – but how do you know which lender to choose? There are plenty of lenders across the UK to choose from, each with their own appetites and specialities. It can be a bit of a minefield when you start to look at what each one offers, and contacting each one to get offers also takes up a large amount of time. Working with a broker such as us, Contact Business Finance, can make this process much smoother and more efficient. We can do the deal-finding for you; figuring out what you and your business needs and approaching the lenders we feel fit your requirements. Ultimately, however, the choice is yours and it is important you are equipped with the knowledge to choose which facility you want to use.
Industry Experience
Ideally, you want your chosen lender to have a wealth of experience. At Contact Business Finance, we would never recommend a lender that did not have the knowledge required to look after you and your business. Each lender will have their own specialities and interests – for example, some lenders offer factoring and others work with selective invoice finance facilities only.
Speed and Efficiency
One of the main reasons for using invoice factoring is the speed – you want to be able to access your cash quickly. Take note of how long it takes the lender to process your invoice and release the funds. The lenders we recommend usually approve invoices the same or next day – the faster the turnaround, the better your cash flow will become.
Fees
It is crucial to look carefully at any offers you receive from your potential lender. There will be various aspects of an offer to look at including service charge, monthly minimum requirements and if you have chosen to include bad debt protection in your facility, how much that will cost. As a broker we will be able to look at the costs, explain what they mean if you are unsure, and tell you how this will look in real-invoice terms.
Prepayment
Prepayment is the percentage of the invoice value that is unlocked from your lender. This rate can vary depending on the industry you work within and the provider that you choose. As an example, with a prepayment rate of 90%, when raising an invoice of £1,000, you will receive £900 on day 1. When the invoice is paid by your customer, you will receive the remaining £100, minus the lender’s fees. When it comes to choosing your invoice factoring lender, it is crucial to determine what level of prepayment you would ideally like to get but understand what you are eligible for.
Contract Terms and Flexibility
Review the contract terms carefully. Some lenders require long-term commitments, while others offer more flexible, short-term agreements. If you contact a lender directly, determine whether they require you to put all your invoices through the facility or whether you can pick and choose. This also highlights why it can be more beneficial to go through a broker – you can tell us what you need and we can put you in contact with the most suitable lender.
Conclusion
There are several factors to take into consideration when choosing your invoice finance lender, but you do not need to attempt it alone. At Contact Business Finance, a commercial finance brokerage in the West Midlands, we prioritise getting to know our clients and their business’ needs to determine how we will put them in contact with the most suitable lender. We will be able to discuss each of the topics in this article and decide what will work for you.