Month: December 2023

Invoice Finance vs Overdraft

Posted on by ali

When a business is looking to raise funding, Invoice Finance and Overdrafts are usually at the top of the list. Both products allow you to raise funds, but in different ways. Here, we discuss the benefits of Invoice Finance when compared to an Overdraft facility.

Invoice Finance gives you access to more funds

Invoice Finance is a product which allows you to draw funds from your sales ledger, usually at around 80% of the total value of the ledger. An Overdraft will generally be a much smaller amount, giving you access to less funding.

Invoice Finance grows in line with your sales

As Invoice Finance is a facility which is fully based against your sales ledger, when this grows so does your facility limit. On the other hand, an Overdraft would usually be fixed at a certain level, meaning that you may outgrow the facility. As a revolving credit facility, Invoice Finance is designed to be flexible to support growing businesses. This means it is easier to increase the amount of borrowing through the facility.

Invoice Finance is a more secure form of funding

An Invoice Finance facility is secured directly against your sales ledger. You will only be able to draw funds from the facility for completed work. An overdraft is rarely secured directly against, so if the business falls on hard times, the director may be more likely to be at risk.

Businesses with a poor credit history are more likely to secure Invoice Finance

If a business has been turned down by the high street banks, or has a poor credit history, they are more likely to get funding through an Invoice finance facility. Due to the facility being secured against a company’s sales ledger, lenders are more likely to provide a facility as opposed to an Overdraft.

Invoice Finance Jargon Buster

Posted on by ali

When a company is looking to put an invoice finance facility in place, there can be a number of terms that are new to them. We have created a Jargon Buster, covering the main terms which a company would come across. Below, you will find a few examples, as well as a link to the page itself!

1) Invoice Factoring – This product allows you to draw funds from the facility, whilst the provider handles your credit control for you.

2) Minimum Fee – The minimum cost of the facility (Typically over a 12-month period)

3) Pre-Payment Percentage – This is the maximum amount that will be lent against a single invoice or ledger.

4) All Assets Debenture – A charge over the business to protect the lender in the event of business failure or non-payment of invoices.

5) Credit Limit – The maximum amount you can borrow against a particular customer.

These are just a few of the terms relating to Invoice Finance. As mentioned, more of these terms can be found on our Jargon Buster page.

 

What is Invoice Finance – Which is Best for You?

Posted on by ali

What is Invoice Finance?

Invoice finance allows you to borrow money against your invoices that are waiting to be paid. These can be late, unpaid or lengthy-term invoices.

Invoice financing is commonly referred to as factoring, invoice discounting and spot factoring; however, whilst these are all types of invoice financing, they are all slightly different.

Here, we’ll be outlining the differences between the 4 types of invoice financing we do at Shire Invoice Finance (along with case study examples) so you can see which option might be the right fit for you.

They are:

1. Factoring
2. Invoice Discounting
3. Spot Factoring
4. Selective Invoice Finance

 

FACTORING

Factoring, also known as invoice factoring, is a financial product that allows your business to raise cash from your outstanding business-to-business invoices.
The factoring company will chase the payments on your behalf.

 

Business type:
Manufacture and sale of chemicals and cleaning products

Business background:
The business had been trading for a fairly short amount of time, approx. 2 years. Good customer base but not a huge number of customers.

Why the facility was needed:

  • Their customers have started to slow down with how quickly they were paying, which was putting huge pressure on the business to pay its bills.
  • The business was also struggling with getting invoices paid, so it needed cash and help collecting.
  • The factoring facility provided helped with both and relieved the business owners’ stress, allowing them to focus on selling and living life normally!

The reason Factoring was the best option:

The business was struggling with its credit control as it was taking up so much time and taking the owner’s time away from generating more sales and developing its product. By putting a factoring facility in place, the invoice finance company took over chasing invoice payments, freeing up a huge amount of time from the owners.

 

INVOICE DISCOUNTING

Invoice discounting is a funding-only type of invoice finance, and allows you to raise funds against your unpaid customer invoices.
This option does require you to chase your own invoice payments.

 

Business type:

Clothing suppliers, manufacturing sportswear for sports teams.

Business background:

Well-established business trading for several years. Has a well-established customer base.

Why the facility was needed:

  • Businesses were looking to increase the amount of sales they did with existing customers but knew this would be difficult as they wouldn’t have the funds to pay their suppliers for the goods required (who all require upfront payment).
  • By using invoice discounting, the business was able to raise funds against all its outstanding invoices on day one as a lump sum and on an ongoing basis. This way, the business was able to purchase stock in larger volumes and at a lower price, enabling a higher level of sales and a bigger margin.

The reason Invoice Discounting was the best option:

Needed an invoice discounting facility to fund all invoices to all customers. Most customers pay in 60 days, so we needed a facility to help with all customers. Invoice discounting was ideal for this business as they already had a strong credit control function and a good accounting system, meaning they only needed funding and not any help with collecting funds back in.

 

SPOT FACTORING

Spot Factoring is where you can borrow funds from single or selected invoices.
This is an ad-hoc/pay-as-you-go service.

 

Business type:

Construction Company

Business background:

Trading for several years – well established but has had its financial problems. I’m looking to get the business back on track this year.

Why the facility was needed:

The business takes on large projects that require large amounts of cash flow at certain times. The business needs access to funding quickly but only occasionally, making spot factoring the perfect solution. As there is no tie-in and nothing to pay when the facility is unused, it is ideal for the business that wants to choose when taking funds.

Why Spot Factoring was the best option:

The business has chunky invoices sporadically, so it wants to pick and choose the ones funded as and when required. The business cash flow is very lumpy, so it only requires funds here and there rather than all the time.

 

SELECTIVE INVOICE FINANCE
Selective Invoice Finance involves borrowing against certain customers rather than individual invoices, focusing on longer-term or slower-paying customers.

It can be used as a long or short-term solution.

 

Business type:

Transport

Business background:

A new start – a small company with one vehicle.

Why the facility was needed:

  • The business needed cash flow daily to pay for fuel, vehicle costs, and the business owner’s salary.
  • The selective facility ensures all jobs can be fulfilled on a daily basis, and that the business owner can take a salary every month, taking away a huge amount of stress!

Why Selective Invoice Finance was the best option:

This business has one main customer, which is a big company and pays on 60-day terms. The company does have other customers, but they all pay very quickly. Funding was only needed against that one customer.

 

Which one is best for you and your business?

Enquire here or call us on 01827 300 310 to chat with one of our award-winning team!

Invoice Finance Vs Traditional Bank Loans: Which is Best for Your Business?

Posted on by ali

When it comes to obtaining financing for your business, traditional bank loans have long been the go-to option. However, in recent years, alternative financing solutions such as invoice financing have gained traction among businesses seeking more flexible and accessible funding options. In this blog post, we will compare invoice financing and traditional bank loans, highlighting their key differences and helping you determine which option is best suited for your business’s unique financial needs.

Traditional Bank Loans: A Brief Overview

Traditional bank loans are well-established sources of financing that involve borrowing a specific amount of money from a bank or financial institution. Here are some key aspects of traditional bank loans to consider:

  • Application process: Bank loans typically involve a rigorous application process, including extensive paperwork, credit checks, and collateral requirements.
  • Eligibility criteria: Banks often have strict eligibility criteria, favouring businesses with solid credit history, established operations, and valuable assets.
  • Long-term commitment: Bank loans often come with long-term repayment plans, requiring regular fixed payments over a predetermined period.
  • Interest rates and fees: Traditional bank loans may have lower interest rates compared to alternative financing options, but they may also have additional fees and charges.
  • Collateral requirements: Banks usually require collateral, such as real estate, equipment, or other valuable assets, to secure the loan.

 

Invoice Financing: A Modern Alternative

Invoice financing, also known as invoice factoring or invoice discounting, offers businesses a flexible and accessible financing solution based on their outstanding invoices. Here’s how it differs from traditional bank loans:

  • Application process: Invoice financing has a simpler and faster application process compared to traditional bank loans. The focus is primarily on the creditworthiness of your customers rather than your own business’s financial standing.
  • Eligibility criteria: Invoice financing providers typically consider the creditworthiness of your customers, making it more accessible for businesses with limited credit history or smaller operations.
  • Cash flow optimisation: Invoice financing provides immediate access to working capital by converting unpaid invoices into cash. This can help bridge gaps in cash flow and fund day-to-day operations or growth initiatives.
  • Credit control services: Some invoice financing providers offer credit control services, handling the collections process and reducing the burden on your business’s resources.
  • Flexibility: Unlike traditional bank loans, invoice financing allows you to finance specific invoices or choose which customers’ invoices to factor, giving you more control and flexibility over your funding needs.

 

Choosing the Right Option for Your Business

Determining whether invoice financing or a traditional bank loan is the right fit for your business requires careful consideration of your unique circumstances. Here are some factors to consider:

  • Urgency of funds: If you need immediate working capital to address cash flow gaps, invoice financing may be more suitable due to its quick approval and funding process.
  • Credit history and collateral: If your business lacks an extensive credit history or valuable assets for collateral, invoice financing can be a viable option as it relies more on your customer’s creditworthiness.
  • Long-term financial planning: A traditional bank loan might offer more suitable terms and lower interest rates if you have long-term financial goals or larger funding requirements.
  • Control over credit management: If maintaining control over your credit control process and customer relationships is crucial, invoice financing allows you to retain that control.

 

Conclusion

Both invoice financing and traditional bank loans have their advantages and considerations. Traditional bank loans offer stability and lower interest rates for long-term financial planning, while invoice financing provides quick access to working capital and flexibility for businesses with diverse credit situations. Consider your business’s specific needs, cash flow requirements, and growth plans to determine which option aligns best with your goals. It may also be beneficial to consult with financial advisors or experts to make an informed decision.

Is Invoice Finance what your Business needs?

Posted on by ali

If you need to offer someone advice on invoice finance, here are some key points you could share:

 

Understand the concept: Invoice finance, also known as invoice factoring or accounts receivable financing, is a financial solution where a business sells its unpaid invoices to a third-party company (factor) at a discount. The factor then advances a percentage of the invoice amount to the business, helping improve cash flow.

Evaluate your needs: Determine if invoice finance is the right solution for your specific situation. Consider factors such as cash flow constraints, the size of your outstanding invoices, and your business’s growth potential. Assess whether the benefits of invoice finance outweigh the associated costs.

Research providers: Look for reputable and experienced invoice finance providers that specialize in your industry. Compare factors such as fees, advance rates, contract terms, customer support, and any additional services offered. Read reviews and seek recommendations from other business owners to make an informed choice.

Understand the costs: Invoice finance involves various costs, including discount fees and service charges. The discount fee is the percentage of the invoice amount that the factor retains as profit. Service charges may include setup fees, transaction fees, or other administrative costs. Ensure you have a clear understanding of the total costs involved and how they will impact your business’s profitability.

Review the terms and conditions: Carefully review the terms and conditions of the invoice finance agreement. Understand factors such as the duration of the contract, the recourse or non-recourse nature of the arrangement, any minimum volume requirements, and potential penalties or termination fees. Seek clarification on any ambiguous clauses before signing the agreement.

Maintain good customer relationships: Since invoice finance involves the factor collecting payments directly from your customers, it’s crucial to maintain strong relationships with your clients. Notify your customers about the arrangement, ensuring transparency and professionalism. Choose a factor that treats your customers with respect and handles the collections process in a manner aligned with your business values.

 

Plan for the long term: Invoice finance can provide immediate cash flow relief, but it’s essential to consider its long-term implications. Evaluate how it fits into your overall financial strategy and growth plans. Assess whether alternative financing options, such as bank loans or lines of credit, might be more suitable in the future.

 

Remember, while invoice finance can be a valuable tool to manage cash flow, it’s essential to thoroughly understand the terms, costs, and implications before making a decision. Consulting with financial advisors or experts in the field can provide additional guidance tailored to your specific business needs.

Understanding the Difference between Invoice Factoring & Invoice Discounting?

Posted on by ali

When it comes to managing cash flow and optimising working capital, businesses often turn to invoice financing solutions. Two popular options in this domain are invoice factoring and invoice discounting. Although these terms may sound similar, they represent distinct financing methods with unique features and benefits. Understanding the difference between invoice factoring and invoice discounting is essential for making informed financing choices that align with your business needs. In this blog post, we will delve into the nuances of both approaches, highlighting their key differentiators and helping you decide which one is the right fit for your business.

 

Defining Invoice Factoring:

Invoice factoring, also known as accounts receivable factoring, involves selling your outstanding invoices to a third-party factoring company. The factoring company advances a percentage of the invoice value, typically around 80% to 90%, upfront. They assume responsibility for collecting payment from your customers and provide you with the remaining balance (minus their fee) once the invoices are paid. Key points to note about invoice factoring include:

  • Immediate cash flow: Factoring provides an immediate injection of working capital by converting unpaid invoices into funds.
  • Outsourcing credit control: The factoring company handles credit control and collections, saving you time and effort.
  • Financing based on customer creditworthiness: Factoring decisions are primarily based on your customer’s creditworthiness rather than your own business’s financial health.

 

Understanding Invoice Discounting:

Invoice discounting, on the other hand, is a financing solution that allows you to borrow against your unpaid invoices without transferring the collections process to a third party. Unlike invoice factoring, invoice discounting remains confidential, meaning your customers may not be aware of the financing arrangement. Key features of invoice discounting include:

  • Retained credit control: With invoice discounting, you retain control over credit management and collections, maintaining direct relationships with your customers.
  • Access to immediate funds: You can borrow a percentage of the invoice value (usually up to 90%) from the financing provider, leveraging your outstanding invoices to secure the loan.
  • Enhanced cash flow flexibility: You can choose which invoices to finance, based on your current cash flow needs, providing greater control and flexibility.

 

Key Differences and Choosing the Right Option:

Now that we have explored the basics of invoice factoring and invoice discounting – let’s examine the key differences between the two:

  • Credit control: Invoice factoring includes credit control services, while invoice discounting requires you to handle credit control internally.
  • Confidentiality: Invoice factoring involves disclosing the financing arrangement to your customers, while invoice discounting allows you to keep the arrangement confidential.
  • Cash flow management: Invoice factoring provides immediate cash flow by advancing a significant portion of the invoice value, while invoice discounting offers flexibility in choosing which invoices to finance.

Choosing the right option depends on your specific business requirements and preferences. If you prefer to outsource credit control and prioritise immediate cash flow, invoice factoring may be suitable. However, if maintaining confidentiality and retaining control over credit management are important to you, invoice discounting may be the preferred choice.

 

Conclusion
Invoice factoring and invoice discounting are valuable tools for managing cash flow and optimising working capital. By understanding the differences between these two financing options, you can make an informed decision that aligns with your business goals. Whether you choose invoice factoring for its credit control services and immediate cash flow or opt for invoice discounting to retain control and confidentiality, both approaches offer valuable solutions for businesses seeking to leverage their outstanding invoices. Assess your unique needs, evaluate the pros and cons, and select the option that best suits your financial requirements and growth aspirations.

A Comprehensive Guide to Invoice Finance: How It Works & Who it’s for?

Posted on by ali

Invoice finance is a popular financing option that provides businesses with immediate access to working capital by leveraging their accounts receivable. It offers a practical solution for companies looking to bridge cash flow gaps, fulfil financial obligations, and drive growth. In this comprehensive guide, we will delve into the workings of invoice finance, its benefits, and the industries and businesses that can benefit from this flexible financing approach.

 

What is Invoice Finance?

  • Definition of invoice finance: Invoice finance is a financial transaction where a business sells its outstanding invoices to a finance company, known as a factor, at a discounted rate in exchange for immediate funds.
  • How it works: Start an application, Get a quote, approval, invoice submission, funding, and collection.

 

Benefits of Invoice Finance

  • Improved cash flow: It helps maintain steady cash flow by unlocking the value of their invoices by allowing them to pay bills, pay employees, and invest in growth opportunities.
  • Fast access to funds: Highlighting the advantage of obtaining immediate funds rather than waiting for customers to pay their invoices, which can take weeks or months.
  • Reduced credit risk: Invoice finance transfers the credit risk of non-payment from the business to the finance company, providing protection against bad debt.
  • Flexible funding: The amount of funding is directly tied to the value of outstanding invoices, allowing businesses to adjust their financing needs

 

Who Can Benefit from Invoice Finance?

  • Small and medium-sized businesses (SMEs): Can be a lifeline for SMEs that may struggle with limited cash reserves, limited access to traditional financing, or inconsistent cash flow.
  • Start-ups and high-growth companies: It can fuel the growth of start-ups and companies experiencing rapid expansion, enabling them to seize new opportunities, invest in marketing, and hire additional staff.
  • Industries that benefit from invoice finance: Manufacturing, Staffing, Transportation, Construction, Healthcare, and Wholesale benefit from this finance as they are reliant on invoices being paid to start the next project, bring new jobs and outside price increase factors

 

Choosing the Right Invoice Finance Company

  • Factors to consider: These are things you should look at when selecting an invoice finance company – reputation, experience, transparency, fees, and customer service.
  • Application process: You should be explained clearly through the application process – information required, payment details, cost breakdown & fees, the amount that can be borrowed and the verification process & credit check.

 

Conclusion

Invoice finance serves as a reliable financing solution for businesses seeking immediate cash flow relief. By understanding how it works, the benefits it offers, and the industries that can benefit from it, businesses can make informed decisions and leverage invoice finance to optimise their working capital, manage cash flow effectively, and propel their growth. Consider exploring invoice finance as a viable funding option to meet your business’s financial needs and unlock its full potential.

How Invoice Finance can help you cope with seasonal fluctuations?

Posted on by ali

Does your business experience seasonal fluctuations in demand and sales?

Do you find it hard to manage your cash flow during peak and off-peak periods?

Do you want to smooth out the highs and lows of your business cycle?

 

If you answered ‘YES’ to any of these questions, then invoice finance might be your ideal solution.

Invoice finance is a way of unlocking the cash tied up in your unpaid invoices. It allows you to sell your invoices to a third-party provider, such as Shire Invoice Finance, and receive up to 90% of their value within 24 hours. The remaining 10% is paid to you once your customer pays the invoice, minus a small fee.

 

Invoice finance can help you cope with seasonal fluctuations by:

  • Providing you with a steady and predictable source of cash flow. You don’t have to worry about cash flow gaps or shortages during off-peak periods, or cash flow surges or excesses during peak periods. You can access the cash you need when you need it, giving you more stability and security.
  • Enabling you to take advantage of seasonal opportunities. You don’t have to miss out on new orders, contracts, or customers due to lack of funds. You can use the cash from invoice finance to buy more stock, hire more staff, or expand your capacity, allowing you to meet the increased demand and boost your sales.
  • Offering you flexibility and scalability. You can adjust your invoice finance facility according to your seasonal needs and preferences. You can choose which invoices to finance and when, giving you full control over your cash flow.

At Shire Invoice Finance, we offer bespoke and flexible invoice finance solutions for businesses of all sizes and sectors. We have over 20 years of experience in helping businesses like yours cope with seasonal fluctuations.

If you’re interested in finding out more about invoice finance and how it can help your business cope with seasonal fluctuations, please click here to request a free quote. We’ll get back to you within one working day with a personalised offer.

Don’t let seasonal fluctuations affect your cash flow and growth potential. Cope with seasonal fluctuations with invoice finance today and take your business to the next level.

How to save time and hassle with invoice finance?

Posted on by admin

As a busy business owner, you know how time-consuming and stressful it can be to manage your invoices. You have to deal with:

  • Chasing late payments from your customers
  • Sending reminders and invoices
  • Handling disputes and queries
  • Reconciling payments and accounts
  • Managing cash flow and budgeting

All these tasks can take up a lot of your valuable time and energy, leaving you less time to focus on your core business activities.

But what if there was a way to save time and hassle with your invoices? A way to get paid faster, reduce your workload, and improve your cash flow?

That’s where invoice finance comes in.

Invoice finance is a way of unlocking the cash tied up in your unpaid invoices. It allows you to sell your invoices to a third-party provider, such as Shire Invoice Finance, and receive up to 90% of their value within 24 hours. The remaining 10% is paid to you once your customer pays the invoice, minus a small fee.

Invoice finance can help you save time and hassle by:

  • Taking care of the invoice collection and administration for you. You don’t have to worry about chasing payments, sending reminders, or dealing with disputes. The invoice finance provider will do all that for you, saving you time and stress.
  • Improving your cash flow and working capital. You don’t have to wait for your customers to pay you, giving you more cash to pay your expenses and invest in your business.

At Shire Invoice Finance, we offer fast and easy invoice finance solutions for businesses of all sizes and sectors. We have over 20 years of experience in helping businesses like yours save time and hassle with their invoices.

If you’re interested in finding out more about invoice finance and how it can help your business save time and hassle, please click here to request a free quote. We’ll get back to you within one working day with a personalised offer.

Don’t let invoicing take over your life. Save time and hassle with invoice finance today and free up more time for your business.

How Invoice Finance Can Help You Overcome The Challenges Of Brexit

Posted on by admin

As you may know, Brexit has brought many changes and challenges for UK businesses, especially those that trade with the EU. Some of these challenges include:

  • New customs procedures and paperwork that can cause delays and extra costs
  • New tariffs and taxes that can affect your profit margins and competitiveness
  • New regulations and standards that can require adjustments and compliance
  • New currency fluctuations that can affect your cash flow and exchange rates

These challenges can put a strain on your cash flow and working capital, making it harder for you to run and grow your business.

But there is a way to overcome these challenges and turn them into opportunities. And that is invoice finance.

Invoice finance is a way of unlocking the cash tied up in your unpaid invoices. It allows you to sell your invoices to a third-party provider, such as Shire Invoice Finance, and receive up to 85% of their value within 24 hours. The remaining 15% is paid to you once your customer pays the invoice, minus a small fee.

Invoice finance can help you overcome the challenges of Brexit by:

  • Improving your cash flow and working capital. You can access the money you’ve earned without waiting for your customers to pay you, giving you more cash to pay your expenses and invest in your business.
  • Reducing your risk and exposure. You can protect yourself from bad debts, currency fluctuations, and late payments by transferring the credit risk to the invoice finance provider.
  • Increasing your flexibility and scalability. You can adjust your invoice finance facility according to your needs and preferences. You can choose which invoices to finance and when, giving you full control over your cash flow.
  • Enhancing your competitiveness and growth potential. You can take advantage of new opportunities, such as expanding into new markets, launching new products, or increasing your production capacity, without worrying about cash flow constraints.

Invoice finance is a simple and smart way of overcoming the challenges of Brexit and turning them into opportunities for your business.

At Shire Invoice Finance, we offer tailored and flexible invoice finance solutions for businesses of all sizes and sectors. We have over 20 years of experience in helping businesses like yours navigate the changing business environment and achieve their goals.

If you’re interested in finding out more about invoice finance and how it can help your business overcome the challenges of Brexit, please click here to request a free quote. We’ll get back to you within one working day with a personalised offer.

Don’t let Brexit hold you back. Unlock the cash in your invoices today and take your business to the next level with Shire Invoice Finance.

Free your potential today by releasing cash on outstanding invoices

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Compare Invoice Finance options including spot and selective.

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