Clancy Business Finance

Business Finance & Property Finance Specialists

Choosing an Invoice Finance provider – what to consider:

For some business owners, using Invoice Finance can be one of the best decisions they make. However choosing the right funder partner can be difficult. Many of the funders seem to offer similar products and they all promise the best rates.  But like any industry, the players and products vary hugely.  That’s why it’s important to ask all the right questions to any potential funders, before making a final decision.

Here are some key areas for you to consider when choosing an Invoice Finance provider:

Reputation: It’s vital that you choose a funder with a sound reputation and a good name in the industry. Check if the funders are members of the relevant industry body – ABFA.  Speak to your peers and business colleagues.

Prepayment levels:  Typically, a funder will provide up to 85 per cent of the value of the value of invoices up front (within 24 hours), with the remainder payable once the debt is collected. Check what percentage the funder will provide upfront, and how fast they will get funds to you.

Cost and charges:  The price of your Invoice Finance will vary depending on your circumstances, the type of facility, and the provider you choose. Shop around – and remember to compare like with like.  As well as considering the obvious costs, don’t forget to check out hidden charges.

Contract term:  While most funders offer standard 12 month contracts, some may look for longer contracts.  Some funders will charge exit fees if the contract term is broken and these can be expensive.

Funders involvement: With some facilities, such as factoring, the funder will manage your sales ledger and debt collection.  With Invoice Discounting, the funders involvement in minimal.  Check how closely involved your funder will be with your business and customers and make sure you are comfortable with it.

Funders liquidity: You can be so busy thinking about your own cashflow problems, you forget to check if your provider has enough cashflow to keep providing their customers with vital working capital.  You need a funder who’ll back you up all the way, and has the financial back up to do it.  Check out the financial status and credit rating of any potential funder.

Your flexible friend:   Some funders are more flexible than others, not only in terms of their lending criteria, but also their attitude to risk.  You’ll probably pay a premium for a more flexible funder. Remember, the old adage , you get what you pay for , still applies, but make sure you don’t pay too much for what you get.

Whatever your decision, make sure that the funder you choose understands your business and is flexible enough to meet your working capital requirements.