Invoice Finance

At Invicta Commercial Finance we have particular expertise in this sector.

More profitable businesses struggle, or ultimately fail, because of a lack of cash to pay the bills when they fall due, than for any other reason. This is often because there are often substantial amounts of cash tied up in their customers’ unpaid invoices. This cash can often be unlocked by using one of the many forms of Invoice Finance that are available. The cash then can be used to pay suppliers or other creditors and for a multiple of other purposes.

As an alternative to a traditional Bank Overdraft, Invoice Finance has several major advantages:
  • The amount that you can borrow increases as your sales increase, since it is based on the value of your sales invoices (Ideal for a growing business)
  • Additional security, (such as charges over property) is not normally required, unlike an overdraft where Banks often require business owners to pledge personal assets as security
  • The cost of borrowing is cheaper (often substantially) than overdraft interest rates
  • Funding can be obtained purely on the strength of the credit-worthiness of your customers, regardless of the financial strength or length of track record of your business
  • Usually no annual renewal fees
  • Debts can be insured
  • Cash is available as soon as invoices are raised
  • Can be used to fund other projects, such as acquisitions
  • Ancillary services, such as credit control and ledger management, can be added to your facility
There are two long held common misconceptions about Invoice Finance.

Firstly, that it is expensive and secondly, that once you use it you will never be able to stop using it. The reality is that this is no longer the case. When compared on a like for like basis, the cost of funds is usually in the range of 2% to 4% above Bank Base Rate. This compares very favourably with overdraft interest rates. The confusion arises because Invoice Finance sometimes involves additional services, such as credit control and this cost is also compared, against the cost of an overdraft, which doesn’t include credit control services.

If credit control and collection services are required then the cost of these will compare very favourably with your cost of employing your own staff. It is very important to compare like for like. Also, provided that it is used as a genuine Working Capital facility, (not just to paper over the cracks!) and profits are retained within the business then the use of the facility will reduce over time as the Working Capital base of the business grows. There are many forms of Invoice Finance and the terminology can often be confusing (particularly as some of the terms actually mean the same thing!).

The mains types of Invoice Finance are:
  • Confidential Invoice Discounting
  • Disclosed Invoice Discounting
  • Agency (sometimes called CHOCS) Factoring
  • Confidential Factoring
  • Non-Recourse Factoring
  • Recourse Factoring
If you are looking to consider alternatives for funding your cash flow or to review your existing facilities to reduce costs and would like to meet for a Free initial discussion please ‘CLICK HERE’.

Invicta Commercial Finance is a trading style of McLaughlin Hook Finance Limited
Registered Office: The Oast, 62 Bell Road, Sittingbourne, Kent ME10 4HE. Registered in England and Wales 5438666. © 2010 McLaughlin Hook Finance Ltd.