Introduction
It is no secret that having an invoice finance facility for your business can assist with issues concerning cash flow. Instead of waiting the usual 30, 60 or 90 days for your invoices to be paid, you can raise your invoices and access the funds the same or next day.
There are multiple types of facility to choose from, each with their own specific features: factoring, confidential invoice discounting, CHOCC and selective invoice finance. But no matter the type of facility you choose, they all have one aspect in common – they can be the key to unlocking cash flow problems.
This article will explore the top five ways in which invoice finance assists companies with the drawbacks of offering credit terms on their products or services. If you feel that invoice finance could be of benefit to your business, we are a specialist brokerage based in the West Midlands and can help put you in contact with the most suitable lender.
- Flexibility
As previously mentioned, there are many types of invoice finance facility to choose from. This depends on your business and what you need from your invoice finance facility.
If you want to put all of your invoices through your facility and are happy for the fact you use invoice finance to be fully disclosed, factoring would be the most suitable option. We often have clients who would prefer that their facility remains confidential which we completely understand. In this scenario a confidential invoice discounting facility would be most appropriate, but the business will need to handle credit control.
It may be the case that keeping the facility confidential is not something important to you but you would still prefer to keep credit control in-house; this is often the case when businesses have spent a lot of time building relationships with their customers and do not want a lender to have that line of communication with them instead of themselves. A CHOCC (Client Handles Own Credit Control) facility would be perfect for this type of business. Finally, it is not compulsory to put every single invoice and debtor through a facility – you have the option to pick and choose, with selective invoice finance.
It is possible to tailor your facility to your company’s requirements – when you can find the right lender. Lenders have varying specialisms and interests in the type of companies they work with; this is why it is so important to speak with a knowledgeable brokerage like Contact Business Finance who can help you find the perfect facility.
- Growth
One huge advantage of having an invoice finance facility is the potential to grow your business in ways that you may have not thought possible. By unlocking cash quickly after sending an invoice, there is nothing stopping you from taking on more work – you can buy supplies, hire staff, or whatever it is you need to plan further ahead. No more saying no to work because you are waiting for payments. At Contact Business Finance we have seen this scenario multiple times over – businesses scale up and grow quicker just by having an invoice finance option available.
It is quite often the case that the facility ends up paying for itself. If you can take on more jobs and have the cashflow to pay for supplies immediately and in bulk, there is the potential to negotiate discounts from suppliers.
- You don’t need to be an established business
Many people believe that a business needs a proven track-record to be eligible for an invoice finance facility, but this is not the case. Some facilities can support brand-new businesses – the only requirements are that you are a registered limited company and trade on credit terms with other businesses. While the fees may be slightly higher in the beginning of your journey if you are a start-up, once you have a credible trading history this will reduce. It is important to consider whether the benefits of having the invoice finance facility outweigh these higher fees, as it may not be possible to scale up your company without that unlocked cash to begin with.
- Speed – invoice finance is fast
When you send your invoices to your lender, the funds will become available usually the same day, or at most within 48 hours. Compared to waiting 30, 60 or 90+ days for access to that money, having a facility can make an incredible difference to a business.
Problems with cash flow can be completely eradicated – we have seen this particularly within the recruitment, manufacturing, and construction industries. These sectors often trade with other businesses and are left waiting for invoices to be paid. We know that there can be a fast turnaround with finishing one job and starting the next, and you need to be prepared – for example hiring staff or ordering materials and supplies. If you can access money you are owed within 48 hours, you can continue safe in the knowledge that you will be able to provide for your customers as promised.
- Long-term solution
One of the biggest benefits of invoice finance is that it can grow with your business. Unlike other forms of borrowing which may be restrictive as your company grows, invoice finance facilities can be adapted to accommodate. Your sales volume may increase and the need for working capital will increase at the same time. With invoice finance, you will have the ability to increase your funding limit and seize those opportunities for growth.
Invoice finance facilities are designed to be dynamic and change with your business. By having the ability to mitigate cash flow issues long term, you can think further ahead when making decisions and planning work. If you know that you will have the ability to grow and scale by having access to funds more quickly, you can make those long-term goals more achievable.
How do I enter an invoice finance facility?
The first step to take is getting in touch with Contact Business Finance, a specialist invoice finance brokerage. We know invoice finance inside and out, and help businesses across the West Midlands and all over the UK find the lender most suitable for their needs. After giving us a call on 01902 219260, we can have a confidential conversation and get to know you and your company. We will then explore the market and help you find that perfect facility.