Combat Late Payment With Invoice Factoring And Survive The Recession February 18, 2009
Posted by janey in : business loans , trackbackThe UK Invoice Factoring market is currently seeing unprecedented demand, with over £200 billion sales invoices expected to have been financed in 2008. Customer late payment issues are playing a part with many larger companies insisting on longer payment terms from their smaller suppliers. Coupled with a recent and important legal case (Spectrum), that affords the Banks significantly reduced security in a company failure (where they have an overdraft in place as opposed invoice finance) this is also having a major bearing.
Sales Ledger finance, commonly known as Debt Factoring or Invoice Discounting, tends to work for those businesses in the “sell and forget” sectors. The lender will want to know that a client has “completed” its delivery of goods or services to the buyer such that the customer will pay on or around the due date. The more complicated the invoices are, the less likely a business is to secure a facility. The main Industries that tend to use invoice finance are Logistics, Manufacturing, Distribution and Service businesses such as printing, design and manpower amongst others. The UK market is extremely flexible these days and will look at all sectors provided the invoice they are funding is deemed “collectable”.
The invoice finance company can rate and check your customers if you want, chase your customers for payment if you prefer to outsource this so you can concentrate on growing your business. Most also provide credit insurance to add on to your facility should you require. Alternatively you can apply for an confidential invoice discounting facility which just provides finance against your sales ledger but leaves you in control of collections. Facilities can be confidential or disclosed to your customers dependent on your financial position and needs.
Most Lenders will advance up to 80% of the value of each invoice within 24 hours of raising the invoice to your customer and will pay over the remaining 20% to you, less fees, once a customer has paid. You can usually view your facility on line to understand how much has been advanced to you, costs for such and which customers still owe money to you and how old these invoices are from due date. You can also download invoices and drawdown cash via a secure internet connection to make your cash flow even faster.
It is vital if a business chooses Invoice Finance that they understand the facility in detail. The right provider will explain all documentation and all charges such that no surprises occur along the way. Be very careful about any contract signed, make sure it has been explained fully, particularly with regard to any notice period.
Enable Finance Ltd have a specific Factoring team dedicated to the UK SME market for further information on how Invoice Factoring could work for your business please contact Enable Finance who will be more than happy to provide with advice and Free Invoice Factoring Quotes.
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