Tag: invoice finance

Invoice Finance Case Study: Selective Invoice Finance & Invoice Discounting (Air Conditioning)

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Shire Invoice Finance Helps Air Conditioning Fitter in the West Midlands Breathe Easy with £380k Funding Package

 

Sector:

Air Conditioning Fitter

 

Location/Area:

West Midlands

 

Funded/Service:

£80,000 Selective Invoice Finance Facility, followed by a £300,000 Invoice Discounting Facility

 

Benefit & Reason:

The business was growing quickly and needed additional funding quickly to fulfil new orders. We were able to get a Selective Invoice Finance line in place within days to support short-term requirements, followed by a longer-term invoice discounting solution. This has allowed the business to take on the new work without the worry of paying staff and suppliers on time.

 

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Is Invoice Factoring Expensive? Understanding the Costs Involved

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Invoice factoring can be a lifeline for businesses struggling with cash flow issues due to slow-paying customers. By selling your outstanding invoices to a factoring company, you receive an immediate cash advance rather than waiting 30, 60, or even 90 days for payment. However, this convenience comes at a cost. Understanding the expenses associated with invoice factoring is crucial before deciding if it’s the right financing solution for your business.

 

Typical Costs of Invoice Factoring

Here’s a breakdown of the costs typically involved in invoice factoring:

  • Discount Fee: This is the primary cost of invoice factoring. It’s a percentage of the invoice amount, typically ranging from 2.5% per annum on the amount borrowed. The discount fee decreases as your factoring volume increases and varies based on factors like your industry and customers’ creditworthiness.

  • Service or Administration Fee: This is a recurring fee often charged on every invoice. It’s either a fixed percentage of your total invoice value or a flat fee covering administration and account management costs.

  • Additional Fees: Depending on the factoring company, you might encounter other fees like: Application or origination fees, Credit check fees for your customers, Same day transfer fee & Early termination fees

 

Factors Affecting Invoice Factoring Costs

The following factors can influence the overall cost of invoice factoring:

  • Industry: Businesses in industries with higher risks of non-payment might face higher factoring fees.

  • Customers’ Creditworthiness: If your customers have less-than-ideal credit scores, factoring companies may charge higher fees to mitigate their risk.

  • Factoring Volume: The more invoices you factor in, the better your chances of negotiating lower rates.

  • Recourse vs. Non-Recourse Factoring: In non-recourse factoring, the factoring company assumes the risk of non-payment from your customers, leading to higher fees.

 

Is Invoice Factoring Expensive?

The short answer is – that it depends. There isn’t a one-size-fits-all cost structure for invoice factoring. To determine if it’s a cost-effective solution for you, consider these points:

  • Opportunity Cost: Calculate the lost revenue due to late payments. If slow payments hinder your growth or ability to pay immediate expenses, using invoice factoring, even with fees, may be worth it.

  • Alternatives: Compare invoice factoring with other financing options like traditional bank loans or lines of credit. Their interest rates might be lower, but the application and approval processes can be more stringent and time-consuming.

  • Long-term vs. Short-term solution: If you have a chronic problem with late-paying customers, invoice factoring might be a more viable long-term solution despite the costs. On the other hand, if you have temporary cash flow struggles, it might make more sense to use a short-term option.

 

Getting the Best Deal

To minimize the costs of invoice factoring:

  • Shop Around: Compare fees and terms from multiple factoring companies before deciding.

  • Negotiate: Feel free to negotiate the discount fee, service fee, and other charges, especially if you have a good track record and strong credit.

  • Understand the Fine Print: Read the contract carefully to avoid hidden fees and surprise charges later.

 

In Conclusion

Invoice factoring can be a valuable tool to improve cash flow. However, it’s essential to weigh the costs against the benefits. By understanding the fees involved and making informed comparisons, you can decide whether invoice factoring is the right solution for your business’s financial needs.

Invoice Finance Case Study: Confidential Invoice Discounting (Agriculture)

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Case Study - Confidential Invoice Discounting

Sector:

Agriculture

 

Location/Area:

South West

 

Funded/Service:

£1,000,000 Confidential Invoice Discounting Facility

 

Benefit & Reason:

The business needed additional funding due to significant growth and slow payment of existing customers. The funding line enabled the business to grow without cash flow worries, and it also provided assistance in terms of credit control and helped the business become more efficient with administration going forward.

 

What is Confidential Invoice Discounting?

It allows you to continue to deal with customers yourself as normal. This means your customers will not know you are using an invoice finance facility.

As with all Invoice Finance products, Invoice Discounting bridges the gap between completing work and getting paid. It is suitable for businesses with a strong credit control process and a suitable accounts package. It allows you to free up cash to grow and attract new customers simply.

 

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Shire Invoice Finance: A Trusted Partner for Growth in Uncertain Times

Posted on by ali

In the ever-evolving business landscape, uncertainties are an inevitable part of the journey. Economic fluctuations, unexpected challenges, and market uncertainties can pose significant hurdles for businesses striving for growth and stability. In such times, having a strategic ally becomes paramount, and Shire Invoice Finance emerges as a reliable partner offering stability and support to businesses navigating turbulent waters.

 

Embracing Stability Amid Uncertainty

  1. Immediate Cash Flow Relief: Shire Invoice Finance acts as a financial lifeline for businesses facing cash flow challenges. In uncertain times, delayed client payments or revenue stream disruptions can be detrimental. Shire steps in by unlocking the value of accounts receivable, providing immediate access to a portion of the invoice amount. This quick injection of working capital can be the difference between stagnation and growth.
  2. Flexible Financing Solutions: The flexibility offered by Shire Invoice Finance is a game-changer. Unlike traditional financing options, Shire adapts to the unique needs of businesses. Whether it’s a short-term cash flow gap or a more extended period of economic uncertainty, Shire’s solutions are designed to scale with the business, ensuring a tailored approach that meets the specific demands of the situation.

 

Partnering for Success

  1. Strategic Planning and Growth Initiatives: Shire doesn’t just provide financial support; it becomes an integral part of a business’s growth strategy. By alleviating financial pressures, businesses can redirect their focus towards strategic planning, product development, and seizing growth opportunities that may arise even in uncertain times. Shire Invoice Finance empowers businesses to look beyond the challenges and capitalize on emerging possibilities.
  2. Risk Mitigation and Stability: Economic uncertainties often bring about increased risks, especially in terms of customer defaults and market unpredictability. Shire’s expertise in risk management becomes a shield for businesses. Through a meticulous evaluation process, Shire identifies potential risks and employs effective strategies to mitigate them, ensuring businesses can confidently navigate uncertainties.

 

Building Trust through Transparency

  1. Transparent and Collaborative Approach: Trust is the foundation of any successful partnership. Shire Invoice Finance values transparency and collaboration. Businesses are kept informed throughout the process, from the initial application to the disbursement of funds. This open communication fosters a sense of trust and confidence, assuring businesses that Shire is a genuine partner committed to their success.
  2. Expert Guidance in Uncertain Terrain: Navigating economic uncertainties requires a depth of knowledge and experience. Shire’s team of experts becomes a guiding force for businesses. Through consultations, insights, and proactive support, Shire ensures that businesses make informed financial decisions, helping them survive and thrive in challenging times.

 

Conclusion: A Strong Ally for Business Resilience

Shire Invoice Finance is a testament to the fact that businesses don’t have to face challenges alone during uncertain times. By providing stability, flexibility, and a collaborative approach, Shire becomes a strategic ally, enabling businesses not just to weather storms but to emerge stronger, more resilient, and poised for growth. In times of uncertainty, Shire Invoice Finance is not just a financial solution; it’s a partner committed to every business’s success and longevity.

Unlocking Growth Potential: Shire Invoice Finance for SMEs

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In the intricate world of business, small and medium-sized enterprises (SMEs) stand as the backbone of innovation and economic vitality. Yet, amidst their contributions, SMEs often encounter financial hurdles that impede their growth trajectory. Enter Shire Invoice Finance, a dynamic solution tailored explicitly for SMEs, offering a pathway to financial flexibility and stability essential for sustained growth. In this exploration, we uncover how Shire Invoice Finance serves as a catalyst for SMEs, unlocking the working capital needed to thrive in today’s competitive landscape.

The SME Dilemma: Navigating Cash Flow Challenges

SMEs face many challenges, with cash flow management often at the forefront. The cyclical nature of business, coupled with delayed client payments and limited access to traditional financing avenues, can create significant hurdles for SMEs striving to maintain stability and fuel expansion efforts. In such a landscape, Shire Invoice Finance emerges as a beacon of hope, offering SMEs a lifeline to navigate cash flow challenges effectively.

Understanding Shire Invoice Finance: A Tailored Solution

Shire Invoice Finance operates on a simple yet powerful premise: leveraging the value of accounts receivable to unlock immediate working capital. Tailored specifically for SMEs, this innovative financing solution allows businesses to convert outstanding invoices into cash, alleviating cash flow constraints and fostering an environment conducive to sustained growth.

Key Benefits for SMEs:

  1. Financial Flexibility: Shire Invoice Finance offers SMEs unparalleled financial flexibility, enabling them to access funds quickly and efficiently. By converting invoices into cash, SMEs can address immediate financial needs, seize growth opportunities, and confidently navigate uncertain economic landscapes.
  2. Stability Amidst Uncertainty: Economic volatility and market fluctuations pose inherent challenges for SMEs. Shire Invoice Finance is a stabilising force, providing SMEs with the stability needed to weather storms and emerge resilient in uncertainty.
  3. Enhanced Cash Flow Management: Efficient cash flow management is paramount for SMEs seeking sustained growth. Shire Invoice Finance empowers SMEs to streamline cash flow processes, mitigate payment delays, and optimise working capital utilisation, thus fostering a conducive environment for long-term prosperity.
  4. Tailored Solutions, Personalised Support: Shire understands that one size does not fit all. With tailored financing solutions and personalised support, SMEs can rest assured that their unique needs and aspirations are catered to with precision and care.

Conclusion: Empowering SMEs for Success

In pursuing growth and innovation, SMEs require more than just financial assistance; they require a strategic partner committed to their success. Shire Invoice Finance emerges as that partner, offering SMEs the tools, resources, and support needed to unlock their full potential. Shire Invoice Finance empowers SMEs to navigate challenges, seize opportunities, and chart a course towards sustained growth and prosperity by providing financial flexibility, stability, and personalised solutions. As SMEs continue redefining the business landscape, Shire Invoice Finance is a testament to innovation, resilience, and unwavering support, empowering SMEs to thrive in an ever-evolving marketplace.

 

#invoicefinance #businessgrowth #cashflow #shireinvoicefinance

Invoice Finance Case Study: Factoring Facility (Engineering Sector)

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Factoring - Invoice Finance - Engineering

 

Sector:

Engineering

 

Location/Area:

North West

 

Funded/Service:

£150,000 Factoring Facility

 

Benefit & Reason:

The business came to us due to a complete breakdown in relationship with their current invoice finance provider. Their provider restricted funding and made life difficult for the business to trade. We took the time to understand exactly what was causing this and remedy the issues with a cheaper facility and access to a greater level of funding.

 

What is Invoice Factoring?

Invoice Factoring is a great alternative for businesses that have just started trading, are growing quickly or cannot secure the traditional forms of funding from their bank. Factoring helps to ensure your business has the cash flow it needs to succeed.

Factoring can be useful for improving your ongoing cash flow. It bridges the gap between completing a job and receiving payment for the work. This means you are able to keep up with bill & wage payments, as well as have the funds to make bulk or early payments to suppliers.

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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.

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Compare Invoice Finance options including spot and selective.

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