You get access to the cash in your invoices a lot quicker
You will probably have been quoted 24 hours which can be done, but it is likely to cost a little more, it is still typically 3-5 days, which is a darn site better than the 30-60 days you would normally expect. To ensure you get your money as soon as possible, we do advise you upload invoices as soon your raise them, even if you don’t draw the money down until later.
You can get a lump sum from current outstanding invoices when you start the process.
You can focus more on sales as the provider will chase the invoices and manage your sales ledger.
Go on, how long do you spend chasing payments? Probably half an hour here, 15 minutes there, but it all mounts up. What if you could be doing other things instead? What about marketing or selling? You could be getting more business in from the time you have saved from passing your invoices over for factoring.
Invoice Finance can be confidential so it really seems like it’s business as normal to your clients.
Not all of our clients like their customers to know they are factoring their invoices. It may well be that you feel there is a stigma attached with it, that’s ok there are confidential facilities available. This way it would seem to your customers as if you had employed a new accounts clerk, not factored your invoices.
The lending limit will grow as your business grows – no need for applying for a new facility as you would with an overdraft or a loan.
One of the big problems with an overdraft or loan is renegotiating it every time you need to increase your limit. You have all the paperwork to do, there’s usually a fee with the bank, and they want another personal guarantee to cover it and it takes 2 weeks to do.
One of the big bonuses with Invoice Finance is that as your turnover grows, so the amount you can borrow grows as it’s directly tied in with your invoicing.
No new paperwork. Just upload the invoices and away you go.
No need to be tied into long term contracts as some providers will offer a 30 day rolling contract.
Not so long ago, Invoice Finance was associated with long term contracts. If you wanted the facility then you would have to agree to a contract lasting 18 months or more.
The market place has changed. As more and more businesses come into the market place, the long term contracts are becoming rarer and rarer. Of course, if you are able to commit long term than you will get a discount on your fees, but no-one’s going to refuse the facility if you don’t want to commit.
If does give you the opportunity to try the service out before committing, so you can make sure that everything is as promised.
No need to put all your invoices in for factoring
There are some clients that will be ‘special case’ ones that you just don’t want to factor. Maybe they pay so quickly anyway there is no need. Or maybe you want to develop your relationship with them on all fronts. This is all fine. Gone are the days where there are draconian rules about putting all your invoices through the facility.
Just have one large invoice you want to factor?
No problem spot factoring will offer this service, one invoice, one agreement no need to tie in for other invoices.
Now with all these advantages you’re probably wondering what the disadvantages are. Well there are some (not many, but a couple).
In most cases you will pass over your credit control to your lender.
Credit Control is an important ‘touchpoint’ in your business relationship. If you have clients that this would concern you, you can either elect not to factor their invoices, or you could just ensure that there is someone making up that time with them through normal customer relationship building.
For the best rates you will need to commit to a long term relationship (typically 18 months).
As with any form of lending, if you commit to a longer period, there is more money made from you over that time. So the monthly profits can be reduced as we will make it back in the longer term. This is just good business sense.
To protect their assets (your invoices) the lender will register a Debenture at Companies House.
A Debenture is a mortgage over the assets of the business, so if you want to enter any form of Insolvency procedure you will need to get their approval.
Why do they do this? Well you could have a lot of outstanding invoices that you have drawn down the money against. You then put the company into Liquidation. Legally speaking, without the debenture, your lender hasn’t got a leg to stand on, they would just have to join the queue with the other creditors. Wit ha Debenture they can ensure that their money is protected.
If your clients don’t pay you will have to repay the amount that has been lent against their invoices, much like you had never raised them.
Although disallowed invoices can cause some confusion, these are invoices that haven’t been paid within a reasonable time period. In these situations you will want to talk to your lender about what has happened (although they will have probably contacted you already). Most of the time it just a couple of minor points that need clearing up.