Feb
01

What Types of Companies Benefit Most From Invoice Finance?

A subset of companies will find the use of invoice financing especially useful; newly formed companies, companies with large clients who are slow to pay and companies doing business overseas. The option of having billing and collections handled by another party, combined with receiving 80 to 90 percent owed on an invoice approximately two months earlier than normal allows businesses to enjoy a predictable cash flow.

New businesses, which find borrowing more difficult than on-going enterprises, benefit from improved cash flow rather than having to constantly negotiate new loans. Additionally, the expertise of the lending institution, with regard to collecting and establishing credit limits, can be invaluable to a business trying to establish itself.

Companies that have a number of clients whose accounts make up a large proportion of their income find not having to wait for invoices to be paid ensures they have enough cash on hand to cover their day to day overheads.

Doing business on the international market is less of a hassle for companies that use invoice finance. The factoring company handles all problems connected with the laws and customs in the client’s country. The hurdles of language and time zones are no longer the provider’s problem, because the factoring company assumes those responsibilities.

With invoice financing, your company is free to concentrate on providing goods and services without worrying about collecting payments, dealing with international trade related problems or slow paying customers.

Jan
29

Invoice Finance: The Successor to Short-term Business Loans

In an example of necessity being the mother of invention, many businesses forced by the tight credit market have found an alternative to short-term business loans. The solution was to use their sales invoices as collateral for a different type of loan, commonly known as invoice finance. While some refer to it as the sale of invoices rather than a loan, the point of invoice finance is to take the task of credit control off the shoulders of the client company and provide it with immediate cash.

Of course, the client company does not receive the full amount of the invoice, because the factor has to be paid, but for many companies the expense is well worth it. They are saved the expense and hassle of employing credit control staff and they receive much needed cash on a predictable timescale, usually within 24 hours of an invoice being delivered.

Knowing when a payment will be received, rather than having to waiting for up to 60 days, brings a sense of relief and opens up opportunities. Expansion, buying in bulk and investing are all possible if the company knows when and how much it will be paid.

Jan
18

Touch Financial Factoring Broker

Touch Financial Factoring is the biggest independent factoring broker in the United Kingdom and the company has access to more than 20 lending institutions.

What are the benefits of using the services of a company such as Touch Financial Factoring over approaching a bank, for example or directly approaching an invoice factoring company?

In fact, the benefits are numerous. In the first place Touch has excellent business relations with a large number of credit providers and can arrange for you to deal with one that is ideal for your specific industry or requirement. The company can, in most cases, also arrange more favourable terms than you would be able to agree on your own.

You must operate a UK business and your customers need to be other companies, not private individuals. Your yearly turnover should be at least £50,000 and your customers should pay in not less than 30 days and not more than 90 days.

It is possible to obtain a quote without committing yourself in any way, so you can easily compare a range of offers.

Jan
14

Which Invoice Finance Solution Is Best For You

When you choose to use invoice financing to increase immediate cash flow in your company, you have two options to choose from.  It is important to choose the right invoice finance solution for your business’s needs, as the two are different.  Your options include invoice factoring and invoice discounting.  While similar, they are each available to different types of businesses.     

Invoice Discounting

The invoice finance solution, invoice discounting, is available to businesses with an annual turnover of at least £500,000.  Some discounters require almost twice that much.  Invoice discounting allows you to maintain control over your sales ledger and can be kept confidential, meaning your customers never know.  This is best for companies with their own in house credit management team. 

Discounting allows you to borrow a set percentage against outstanding invoices.  You pay down the borrowed amount when the customer pays you.  In the interim, you pay interest as with business loans.  Once paid, you receive the full amount of the invoice minus the discounter’s service fee.

Invoice Factoring

Invoice factoring only requires an annual turnover of £50,000.  This makes it a more popular solution as it fits with most sizes of business.  Some factors will actually accept businesses with less turnover if they meet other requirements.  Factoring does provide the option to have debt collection handled by the factor instead of you.  If the factor collects debt, customers must be made aware of this, since the factor contacts them.  You only pay a set percentage of the invoice as the factor’s fee.

Jan
08

New Business Loans – a great way to finance your company

New business loans are not designed for anyone looking to start a new business. They are also ideal for those businesses that want to expand, but need the cash to buy machinery, equipment or stock or even carry out major building alterations.

Obtaining a new business loan form a bank is a lengthy procedure. You have to prove that your business is credit worthy by supplying financial statements for a number of previous years. The bank will study your cash flow situation and determine whether you qualify or not. Even then, actually getting your hands on the cash will still take time, because the application has to go through numerous channels.

There is a much easier way to circumvent all these hurdles; it is called invoice financing. You simply contact a financing company, provide proof that you have sufficient outstanding collectable invoices and the company will give you a reply virtually immediately. In many instances you can have the cash in your bank account within a matter of a couple of days.

You will not receive 100% of your outstanding debtors upfront though. In most cases it will be closer to 70%, the actual percentage being dependent on a number of factors.

Dec
25

Business Finance Options for a Growing Company

If you have ever been involved in a business start-up, you know how difficult it could be to get business finance for those first few years during which you are struggling to establish yourself in the market place. You have to spend huge amounts of money on marketing, you have to buy new tools and machinery and you have to provide favourable payment terms to your debtors to prevent them from choosing one of your competitors.

If yours is the type of business with lots of fixed assets; buildings, land etc. you might find it relatively easy to get access to bank finance. You will, however, find the application and approval process cumbersome and the repayment terms inflexible.

Raising business finance through invoice factoring is, in many cases, a better solution. You do not have to provide the factor with financial statements or even credit references. All they are interested in is that you have outstanding invoices to cover the amount you want to borrow. Normally they will then give you a cash advance of up to 85% of that amount. Once your debtors have paid, they deduct their fees and pay out the balance.

This has several benefits. The more you sell, the more cash you will have access to, which is great if your business is growing. On the other hand, if there should be a downturn in the market, you are not bound to a fixed monthly repayment, if you receive less money from your debtors your responsibility towards the factor will decrease accordingly.

If you opt for non-recourse invoice factoring, the factor will even bear the risk of unpaid debts. This will have a cost implication though, based on a percentage of your outstanding debtors. With recourse financing your business has to bear that risk.

Nov
17

About Touch Financial

Touch Financial is the largest independent broker specialising in invoice finance in the United Kingdom. An award-winning company, it aims to serve the needs of businesses by finding the most appropriate solutions to sourcing working capital. To do this it has brokered professional working partnerships with more than 20 respected lenders.

Touch Financial can provide a comprehensive service. The company can supply advice and information about available funding options, including invoice factoring and invoice discounting, and protection from bad debt. The aim is to offer flexible solutions for businesses in order to promote healthy cash flow, resulting in business growth.

Invoice Finance

An invoice finance service allows lenders to advance a high percentage of the value of invoices raised within one or two working days of their presentation. This is achieved either through invoice factoring or invoice discounting. Both types of invoice finance use similar methods for generating revenue: once an invoice has been submitted, a pre-arranged amount of the value of the invoice will be advanced to the business by the lender. The full balance due, less any fees or charges, is then paid when the invoice has been settled. To summarise: the lender raises income by charging fees that relate to the value of the invoices against which funds have been borrowed.

Factoring

Factoring is a process that can provide steady and regular cash flow to a business. The lender (factor) normally takes control of the credit management system used by the business. Small and Medium-sized Enterprises (SMEs) normally do not have in place an in-house credit management system, so this can be a great help for businesses planning to borrow in order to start, grow or expand a business.

Discounting
 
Invoice discounting has the capacity to provide a business with a steady flow of cash. In this case, however, control of the sales ledger can be maintained by the business. Well established companies tend to prefer this method of invoice finance as often they have one or more staff in place dedicated to looking after this area, and/or procedures that deal with credit control.

Nov
07

Business Loans for new businesses

When starting up a new business, or looking for new ways of supporting an existing business, it is important to identify the business finance options that are most appropriate and fit for purpose. New business loans are an obvious possibility, however alternatives include, for example, equity finance, stock market flotation or a share issue. There are grants and government support schemes in specific areas, or there are commercial mortgages. Then there are capital allowances that may bring added benefits to the business. First, establish what kind of financing best suits the business plan.

Borrowing

If a business loan is the preferred option, remember that banks and other lenders compete to offer attractive borrowing packages to business customers. So it is worth taking some time to compare the types of business loans being offered, the rates that apply and the advantages that may be offered by one lender as opposed to another.

Ask Key Questions

Will the lender offer savings in any particular area, such as allowing customers to operate a new business account free of bank charges for the first year? What level of collateral will be requested? Business loans inevitably demand a commitment so it is wise to check whether a guarantor will be required, or a personal property will be needed for security for the business loan.

New businesses in particular can often struggle to raise funds via business loans, precisely because they are a new enterprise and have no track record of success. From the lender’s point of view, this makes them a more risky prospect than is likely to be the case with existing businesses.  Remember that it is vital not to enter into any borrowing agreement without having read and understood the ‘small print’.

Nov
02

New Business Loans From the Government

Starting up a new business is always daunting and the one question that everyone always asks themselves is “where am I going to find the money?” Banks will often be reluctant to lend to business owners who do not already have a proven track record, leading to the vicious catch 22 situation whereby you cannot get capital without the experience gained owning your own business and you cannot get experience in owning your own business without capital. Fortunately, Her Majesty’s Government has several schemes and products in place, which are designed to provide low-interest new business loans and even outright grants to those who need it most.

Government Help in Attracting Business Finance

The UK government offers assistance to those seeking investment through its Business Link programme. Business Link’s website has a variety of tutorials on everything from preparing a business plan to approaching potential investors. The tutorials are printable, making it possible to produce a portfolio, in PDF format, with which to impress prospective financing sources.

Take it to the Bank

The site also gives detailed information on approaching banks for financing, including what they look for in a business, credit rating and scoring and a detailed checklist of what you will need in order to prepare that all-important bank application.

Government Grants

Sometimes, the government will give a grant to new businesses that are just starting up. Needless to say, competition for these grants is fierce and so the eligibility criteria are very strict. Your company is more likely to be eligible if it is in an area with high levels of social deprivation and/or if it is in a sector that has been hit particularly hard by long-term economic and social trends, for example agriculture or fishing, having said that, anyone could be eligible. Business Link provides an online questionnaire to help put anyone considering starting their own business in touch with both national and regional grant providers. These institutions each set their own eligibility criteria for new business loans. The site is free to use and so you have nothing to lose by checking it out.

Oct
26

What is Invoice Financing and how does it help businesses?

Invoice financing encompasses a range of solutions offered by factoring companies and banks to solve business cash flow difficulties. Different products have been developed to meet the needs of different scales of business, all of which go beyond the scope and flexibility of traditional credit methods.

At the heart of this approach to credit provision is the cash potential in trade debt, and for this reason retail or cash only businesses are not eligible. However, if a business is invoicing on normal trade credit terms, they can use the credit offered by “factors” on that debt. Typically, up to 85% of the value of an invoice can be released within days of an invoice being issued. 

There are three basic products available under the umbrella of invoice financing provided by companies often known as “Factors”. Factors, who may be finance houses, dedicated companies or banks, take on more or less of the debt risk, open an account and provide a line of credit ahead of debt settlement. The factors charge agreed fees for the level of service offered, and interest on the amount of cash actually drawn down. The credit is normally available within a day or two.

Invoice discounting, the simplest form, keeps the sales ledger administration with the client. Factoring, the next level, usually sees the sales ledger and debt recovery administration pass to the factor, who may also provide a wide range of management support services.

Suitable for large companies is asset based lending, where invoice financing is allied to a line of credit advanced against the fixed assets of a business.

Go back to top