SMEs
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Invoice Finance / Factoring – Case Study

The Client:

The client is a Freight Forwarder business and has traded as a Limited Company for the past 7 years, with a healthy turnover of circa £600,000 per annum.

The Scenario:

The client has had consistent cash flow issues due to their providing standard payment terms of 60 days to their customers for invoices, in addition to experiencing occasional late payments. Conversely the operating costs of the business, being predominantly wages, needed to be paid either weekly or monthly, therefore presenting an overall cashflow issue.

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The Solution:

The client was initially presented with several Business Loan options we managed to secure for them, although they ideally wanted a greater degree of flexibility in their borrowing. We therefore searched the whole market for an Invoice Finance facility for them as this was deemed the most suitable solution for their needs.

We managed to secure a £100,000 Invoice Finance Facility which will enable them to be paid advances on their outstanding invoices up to the facility limit over the coming year. The facility works with the lender deducting a set percentage as their fee, once the invoice has been paid by the client’s customers.
This solution and Invoice Finance Facility will greatly aid the client’s cashflow when they need it most and it won’t be restricted by any rigid monthly repayment terms.

Summary:

Invoice Finance / Factoring is designed to increase a company’s cashflow and fund growth. It is a relatively quick method for accessing business finance against a company’s account receivables.
Whilst personal and business credit may prevent access to Business Loans in some cases, Invoice Factoring Lenders are more focussed on the ability of a business’s clients payment history.
The facilities put in place are invariably Unsecured options which don’t require security over and above the invoices themselves, whilst also removing the time-consuming headache of chasing payments, since these now become the responsibility of the lending partner.

If you have any questions about Invoice Finance &/or want to receive a free quotation or advice, please call 03303 112 646 today. You can also fill in this short online form to get started. Our team of Invoice Finance Experts will get back to you straight away.

Brexit
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How Invoice Finance could drive the UK economy following a no-deal Brexit

With the details of Theresa May’s recent Brexit deal pushing cabinet members to resign, and a seemingly long road ahead before a draft deal is passed by the UK parliament, a no-deal Brexit is becoming more than just a worst-case scenario.

Small-to-medium-sized businesses are making more conscious efforts to put serious contingency plans into place, as a result.

A CBI survey on Brexit preparedness this year stated that more than 50% of businesses had examined different Brexit scenarios, and more than 60% had begun developing contingency plans in the event of no deal.

However, findings from the same survey showed that 77% of businesses said the number of potential scenarios made planning for Brexit challenging. Amid all the uncertainty, the question remains, what can SMEs do to keep a strong economy post-Brexit?

A study published this year by Equiniti could have highlighted Invoice Finance as the answer. The report demonstrated a close correlation between the level of business borrowing and rising Gross Domestic Product (GDP); connecting the two makes a strong case for Invoice Finance being an optimal way to fund business growth in the wake of a cliff-edge Brexit.

Understanding the threats

So what happens if we depart from the European Union with no concrete agreement? Where does that leave the small business owners of Britain?

One of the biggest talking points surrounding life post-Brexit falls on the dissolution of a transition period. Without a deal in place before exiting the EU, we would need to revert to trade on the basis of World Trade Organisation rules in a matter of days, meaning businesses would need to be ready to react to the changes, and fast.

CBI data shows 48% of businesses that had completed scenario planning found the main difficulties related to the costs incurred for internal resources or for hiring external help.

With no implementation period, increasing costs attached to simple business essentials, additional tariffs and the anticipated fall in sterling, SME survival could be in real jeopardy.

Numerous organisations including the Centre for Economic Performance at the LSE and the OECD have raised concerns that the WTO scenario may reduce UK GDP by up to 10% or more, which could result in company earnings and stock prices reducing with it.

These unfavourable outcomes could act as deterrents to potential investors looking for investment opportunities, placing further pressure on the types of funding available for SMEs.

To survive a no-deal Brexit, UK SMEs will need to find quick and accessible ways to acquire and maintain healthy cashflows, source new suppliers, and access funding facilities that grow in line with their business to help pay unexpected tariffs, charges and taxes.

However, searching for the best most relevant methods of financing and investment will be difficult in the current climate, leading many to query which kind of financial backing is the most viable for SMEs post-Brexit?

Connecting the dots

There are a small number of financing options that allow SMEs to borrow large sums of money without having equally large minimum turnover requirements.

There are even fewer that also provide flexibility, competitive prices and the kind of quick turnaround decisions that will be necessary to keep the economy afloat post-Brexit.

One of the main sources of funding that adheres to all the above is Invoice Financing, and it is this option that may well hold the key to the betterment of the UK economy.

Invoice Finance is a way for businesses to borrow money against the outstanding amounts due from their customers. Businesses pay a small percentage of the invoice amount to the lender as a borrowing fee which allows business owners the financial flexibility to access working capital.

Findings from the Asset Based Finance Association (now known as UK Finance) show that Invoice Finance is already popular amongst SME’s, with the amount advanced to the UK’s smallest businesses jumping over 60% within just a year. The goal here will be for SMEs to continue this pattern after Brexit decisions have been made.

With small and medium enterprises totalling 99.3% of all UK private sector businesses, the loss of capital from this sector could stifle business growth and impact the overall strength of the British economy.

To stop this from happening, small-to-medium sized businesses need to continue growing and thriving, with strategic lending solutions such as Invoice Financing acting as a brilliant way to adapt confidently after Brexit has passed.

Source: Asset Finance International

invoice financing
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How invoice financing could help London businesses

Setting up and running a business in London offers a lot of fantastic opportunities across many industries, from finance and technology to catering and more. With these opportunities and the chance to grow comes plenty of obstacles and challenges though. As one of the most expensive cities in the world, the costs can set many back. Invoice finance can offer a solution to many London businesses in various ways.

Cover the rent

One of the largest expenses for any London business will be renting office space. The housing market gets a lot of attention due to its ever-increasing prices in the UK’s capital city with less paid to commercial buildings. In London the average cost per person to rent office space ranges greatly between £650 to £1400 per person. This is more than double and at times triple that of that in Birmingham, Manchester and Leeds. Invoice financing can help provide the finance at the start of the month to cover rent before clients pay their invoices.

Get ahead of the competition

Most other businesses know the value of setting up at least a base in London, meaning whichever sector yours works in there will likely be plenty of competition nearby. Invoice financing offers the opportunity to grow your business by providing finances up front that you are owed by clients. Rather than hold off from any ambitious projects until they have settled, you can use these funds to grow and take advantage of opportunities your competition in London may otherwise miss out on.

Stay on top of bills

The main thing that kills 25 per cent of businesses is poor cash flow. In London especially, this can occur due to costly bills and overheads going out before client payments have landed. With invoice financing your cash flow process can be smoothed over by having easy and quick access to the cash required when it’s needed. This can ensure you stay on top of bills and don’t become one of the 25 per cent.

Starting up

London provides a great environment for starting a business, with it a go to place for technology and financial start-ups. Along with ensuring you have enough initial capital to get started, you will need enough to cover the costs and develop growth. Invoice financing can help work towards this if your capital starts to run out and the business has to wait a few weeks or months before clients are due to pay (with little room to negotiate being a small company).

Starting or running a business sin London can be highly successful and invoice finance could be a solution worth investigating to create a strong financial process.

Source: London Loves Business