One in five businesses fail due to poor or non-existent cashflow, with successful, well-structured companies boasting sizeable reserves. Being something that most business owners are aware of, many decide to explore the option of invoice financing.
Invoice financing is one way businesses can avoid a cashflow crisis. In short, businesses can claim against their unpaid invoices, not having to wait weeks or even months to be paid for the work the business has completed. By invoice financing, businesses can ensure late invoice payments do not impact them, being a credit facility that more than 40% of UK SMEs now utilise.
While every invoice finance company operates in a different way, it is common for invoice finance/factoring companies to allow its customers to take 90% of the money tied up in unpaid invoices. The rest of the money will be paid to the business once the customer has settled the invoice, minus the fees the invoice finance company will charge for the facility. Fees can vary from lender to lender. This is why many choose to utilise our brokerage, comparing lenders and the live offers available via our extensive panel of providers.
Invoice financing has proven to be hugely beneficial to businesses that need to get their hands on their money quickly in order to aid growth. Whether that be funds needed to place an order with a supplier, to make an investment or to purchase marketing/advertising services, the truth is, cash makes cash. By having a cash advance through financing, businesses can ensure unpaid invoices do not hinder growth plans. What’s more, businesses can use this service as a one-off solution or multiple times throughout the year.
If your business turns over £25,000 or more, you may be interested in and be eligible for invoice factoring. By opting for invoice factoring, you can request that the lender approaches the client on your behalf to collect the debt. This can prove hugely beneficial for time-poor companies that do not have hours to set aside to chase and collect debt. With the help of an experienced credit control team, it is likely that your invoices will be paid quicker than if you alone were emailing/calling the client.
If you have a credit control facility in place already and your turnover is £100,000 or more, invoice discounting may be an appropriate avenue to go down. When you collect your money from your client, you will return the advance to the lender. You have the option to disclose whether or not you used invoice discounting or not.
Worried what will happen if the client cannot pay? Many providers offer the option of ‘Bad DebtProtection’ as part of their service. This means that even if the client couldn’t pay, you are protected.
It is important to remember that costs and charges applied to invoice financing services vary hugely from one lender to the next. This is why it is important that you contact a broker like us to ensure you are getting the best deal possible. Not only will this help you enhance that bottom line but as experienced advisors, we can ensure you are making financial decisions that are in line with your growth plans and vision.
Contact us today and get the ball rolling to end your cashflow worries.
"I have recently moved to Lime Advisory and they are great. Our account manager Jamie Williams in particular is professional, responsive and really knows his clients. We feel looked after and would definitely recommend!"