What is it?
With fast-growing businesses, the management of cash flow is often the biggest challenge. Waiting for payments from customers, where payment terms can be anywhere from 30 to 120 days, can really limit your Client’s business potential to grow.
With these innovative Invoice Finance products, companies can effectively sell their invoices, straight after the delivery of their goods or service, so that they no longer have to wait for their customers payments to come in. Once your Client’s company has been approved, it can then unlock anything up to 90% of any particular Invoice’s face value straight after delivery, and use that released cash to either purchase new inventory, or proceed with business-critical projects, or for the payment suppliers or staff, or indeed any other purpose whatsoever.
‘Spot’ Invoice Financing is very different to traditional ‘Factoring’ mainly because it’s so flexible – your Clients don’t have to ‘Factor’ their entire invoice ledger, or face heavy entry and exit charges for a Factoring Facility (which is usually the only option offered by their own bank), but instead they can now just pick and choose whichever Invoice (or Invoices) they would like to sell, whenever it suits them.
With traditional Factoring facilities, there is usually a lengthy diligence process before the facility can be set up, along with hefty entrance (and exit) fees for having that facility, and a myriad of fees every time the facility is used, plus a requirement to Factor every Invoice (offered with payment terms) through that facility thereafter.
With Invoice Financing, the whole process (from approval to first invoice purchased) can usually be agreed and arranged within just 48 hours, and the company can then just pick and choose whichever Invoices to factor, as and when, thereafter.
The Invoice Finance transaction involves the purchase of a chosen Invoice from your Client. The purchaser will then own that Invoice, and receive full payment from the debtor once it falls due. On receipt of the full payment your client’s company receives the balance not yet received, less the Transaction and Discounting Fees.
Transaction fees can vary from 0.55% up to 3.25% of the Invoice face value (dependent on both parties size and financial strength) and the Discounting Fee is the interest charged (on the amount drawn) for the period until the Invoice is finally settled (ranges from 0.5% to 2.75% per 30 days – again dependent on both parties financial strength)
The total cost to your Client’s company is typically between 2.5% to 4% of the Invoice’s face value, dependent on the turnover of your client’s company, and the strength of the company responsible for payment of the relevant Invoice.
In the event that the Debtor fails to repay the relevant Invoice when due, your client becomes responsible for either buying back the Invoice, or replacing it with Invoice/s for the equivalent amount of the original one.
If your client’s business is a LLP or Limited company registered in the UK or Ireland, and has turnover greater than £100,000 per annum (according to its last set of Filed Accounts), they will be eligible for a credit limit with our providers. If less than 1 years’ trading, then the provision of Purchase Orders receivable, or formal Contracts valued at £300,000+ will suffice instead. The minimum face value for any Invoice to be considered is £3,000.
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We’ll then move swiftly to get your Client’s Company approved and Credit Limit agreed. This process usually takes around 48 hours, and thereafter the first Invoices can be submitted for underwriting.