Invoice finance is hardly a new concept - it's been around in some form for hundreds of years.
Today, it's used by thousands of businesses worldwide - of all shapes and sizes - as a reliable method of generating working capital.
So, why is it still a relatively niche product? In the UK, although the industry is growing again following a brief period of stagnation, the total number of businesses using invoice finance has stubbornly refused to budge much beyond 40,000 for a number of years.
Not to be sniffed at, but in the grand scheme of things a tiny proportion of the SME's in the UK that could be benefitting from the cash flow benefits it offers.
As the economic recovery gathers momentum, and growth returns, is it time for you (or your clients) to be considering invoice finance as a funding option? Here are 4 reasons why I think you should be.
1.
It's Accessible.
Hardly an option of last resort, it's now widely regarded as a mainstream product by funders and advisors alike.
Why? Because unlike traditional funding options, less emphasis is placed on the historic financial performance of the business and strength of the balance sheet by the funder when considering an application.
Their primary concern is the asset they are securing the loan against - the receivables - and the quality of the management team running the business.
Personal guarantees are not always required.
It's a highly competitive market with banks and independent providers offering a range of solutions to suit just about every requirement; try Googling 'invoice finance'! 2.
It's a Flexible Form of Business Finance.
It's 'sales linked' meaning that as your business grows, the funding available to you grows with it.
The funder will typically advance up to 90% of your outstanding invoices so as you generate more sales and issue more invoices, you increase the working capital at your disposal.
This is where invoice finance really comes into it's own - compare it with the fixed limit of an overdraft or loan; it's less restrictive and encourages growth.
3.
It Protects Against Bad Debts.
A major benefit, and one that is often over-looked, is the protection it offers you against the threat of bad debts.
Every facility will include credit opinions of new and existing customers, and this is often enhanced by the funders own payment experience.
By setting an appropriate funding limit for each customer, the funder will limit your exposure to those that may not be able to pay.
4.
It Saves Time and Money.
Some types of invoice finance include a collections service, effectively outsourcing your credit control function to the provider.
The level of service provided can usually be tailored to suit your requirements and budget.
Time saved chasing debts can be better spent elsewhere and the removal of a fixed overhead will have a positive impact on the bottom line.
So, what do you think? Are these benefits compelling enough for you to consider using invoice finance, or to advise your clients to? If not, why not?
Today, it's used by thousands of businesses worldwide - of all shapes and sizes - as a reliable method of generating working capital.
So, why is it still a relatively niche product? In the UK, although the industry is growing again following a brief period of stagnation, the total number of businesses using invoice finance has stubbornly refused to budge much beyond 40,000 for a number of years.
Not to be sniffed at, but in the grand scheme of things a tiny proportion of the SME's in the UK that could be benefitting from the cash flow benefits it offers.
As the economic recovery gathers momentum, and growth returns, is it time for you (or your clients) to be considering invoice finance as a funding option? Here are 4 reasons why I think you should be.
1.
It's Accessible.
Hardly an option of last resort, it's now widely regarded as a mainstream product by funders and advisors alike.
Why? Because unlike traditional funding options, less emphasis is placed on the historic financial performance of the business and strength of the balance sheet by the funder when considering an application.
Their primary concern is the asset they are securing the loan against - the receivables - and the quality of the management team running the business.
Personal guarantees are not always required.
It's a highly competitive market with banks and independent providers offering a range of solutions to suit just about every requirement; try Googling 'invoice finance'! 2.
It's a Flexible Form of Business Finance.
It's 'sales linked' meaning that as your business grows, the funding available to you grows with it.
The funder will typically advance up to 90% of your outstanding invoices so as you generate more sales and issue more invoices, you increase the working capital at your disposal.
This is where invoice finance really comes into it's own - compare it with the fixed limit of an overdraft or loan; it's less restrictive and encourages growth.
3.
It Protects Against Bad Debts.
A major benefit, and one that is often over-looked, is the protection it offers you against the threat of bad debts.
Every facility will include credit opinions of new and existing customers, and this is often enhanced by the funders own payment experience.
By setting an appropriate funding limit for each customer, the funder will limit your exposure to those that may not be able to pay.
4.
It Saves Time and Money.
Some types of invoice finance include a collections service, effectively outsourcing your credit control function to the provider.
The level of service provided can usually be tailored to suit your requirements and budget.
Time saved chasing debts can be better spent elsewhere and the removal of a fixed overhead will have a positive impact on the bottom line.
So, what do you think? Are these benefits compelling enough for you to consider using invoice finance, or to advise your clients to? If not, why not?
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