The invoice finance market has grown considerably in recent years, and as a result has become more competitive. Also known as ‘spot factoring’ it could be useful for those in the construction industry, for example. They keep control of all communications in relation to chasing debt, usually because it is felt that customers would object to third party involvement.įor businesses with significant or ongoing contracts, single invoice finance guarantees a large cash injection at the end of the project. Many people choose confidential invoice discounting in order to maintain established, strong customer relationships. Factoring or discounting ‘without recourse’ is the opposite, but would attract higher fees because of the increased risk to your lender. We speak to company directors just like you every single day, and we are here to give you the help and advice you need.Ĭall our team today on 08 What are common terms and conditions of invoice finance?Īs we mentioned earlier, you may be offered an agreement ‘with recourse’ which in practice would mean that you have to repay any money advanced if your customer fails to pay. If your company is struggling with unmanageable debts, squeezed cash flow, or an uncertain future, you are far from alone. Fees can vary considerably between invoice factoring and discounting - the latter leaves you in control of your sales ledger and is often the cheaper option, but you need to understand the ramifications of each alternative. If you’re struggling to understand any aspect of your factoring quotes, seek advice from a broker or other finance professional. How client-friendly are the lender’s systems and processes?ĭo you have a single point-of-contact on a dedicated phone line, or will you need to negotiate a frustrating phone system each time you have a query? Also check out their reputation for client service and response times, as it’s detail like this that affect your entire experience. It’s important to read the small print and not just the overall cost, as an invoice finance agreement is not always easy to exit once signed. If they are offering a factoring agreement ‘with recourse,’ you remain liable for any payments they are unable to collect. How will each lender chase customer payments? The deal offered may appear to be the best, but if it’s based on providing collateral there is an inherent risk for you.
Cost of invoice factoring professional#
If so, you need to seek professional advice on whether to go ahead. Is any form of security being requested by the lender?
Their calculations are based on a range of factors when deciding how much money will be advanced, and you may need further explanation to ensure you’re getting a good deal. There should be a percentage figure within the quotation for how much finance will be released with each invoice.
How much finance will you receive for each invoice? Other details that might be included within invoice factoring quotes If you compare individual service or discount charges on a like-for-like basis, you won’t get a reliable result. The important point to remember when comparing quotes from different lenders is to cost each one in total over the proposed agreement period. (VAT will also be added to the above charges)
These could include money transfer fees, and will vary between lenders Similar in principle to the interest charged on a bank loan, for smaller companies the discount charge may be incorporated within your quoted service charge Generally a fixed monthly fee or percentage of your annual turnover
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