Invoice Finance
Invoice Finance has many names and comes in many guises such as including Debtor Finance, Factoring and Invoice Discounting. Essentially they all have one thing in common, they raise finance secured against the debtor book. It's one of the most flexible, accessible and versatile cash flow solutions for businesses today. Its suited to a wide range of businesses that sell on credit terms to other businesses.
It can be particularly beneficial in the following common situations which many businesses face:
It works by releasing working capital from outstanding invoices and injecting it back into the business quickly, efficiently and cost effectively. With stronger cash flows and a flexible source of funding, the business is free of funding constraints and can focus on management and growth. There are three key steps in how this works:
Normally the whole of the debtor book is financed however, occasionally you may have a single debtor which is slow to pay. We've got this covered too with a specialist lender who will finance a single transaction only.
There are generally two basic fees incurred in invoice financing :
Service Fee - this is a fixed percentage of the face value of the invoice, negotiated upfront and pays for the daily service of managing your account.
Discount fee - this is effectively the interest and is calculated on the daily outstanding balance and charged monthly. You are only charged on what you use, not on any un-drawn portion. This reflects the quality of your business and debtor book.
The beauty of this facility is that depending on your business and needs, the facility may be confidential and your debtors will be none the wiser or alternatively you could get the full service which includes a professional credit controller working on your behalf, without having to employ somebody full time.
At Omega Finance, we deal with a number of specialist providers in this field and the beauty of this facility is that it can work alongside your traditional banking lines with minimal disruption. It's not suited to all businesses. So, the key qualifying criteria is that the business must sell to other businesses on credit terms, invoice for completed sales and turn over more than $100,000 per annum. Businesses that manufacture, wholesale and business services e.g. labour hire, security, transport, cleaning and printing are great examples of businesses that are most suited to this form of finance. If you think your business could benefit from an exploratory conversation, give us a call.
It can be particularly beneficial in the following common situations which many businesses face:
- Slow debtors paying starts causing cash flow pressure
- The business has large regular outgoings whereas income can be lumpy and irregular
- No further property based security is available to a lender to secure extra borrowing against
- To assist with a management buy out, buy in or acquisition
- To obtain settlement discounts by paying suppliers early
- To reduce or scrap early settlement customer discounts to protect your bottom line
- If you're too busy but can't justify or afford a full time credit controller
It works by releasing working capital from outstanding invoices and injecting it back into the business quickly, efficiently and cost effectively. With stronger cash flows and a flexible source of funding, the business is free of funding constraints and can focus on management and growth. There are three key steps in how this works:
- The client raises an invoice for completed work/delivered good and uploads the invoice to the financier
- The financier will advance funds to the client against the face value of the invoice up to an agreed limit (typically between 60 -80%). These funds will be transferred to the client's bank account within 24 hours
- Once payment is collected from the debtor, the financier will return the balance of the invoice amount (less the service fee) within 24 hours.
Normally the whole of the debtor book is financed however, occasionally you may have a single debtor which is slow to pay. We've got this covered too with a specialist lender who will finance a single transaction only.
There are generally two basic fees incurred in invoice financing :
Service Fee - this is a fixed percentage of the face value of the invoice, negotiated upfront and pays for the daily service of managing your account.
Discount fee - this is effectively the interest and is calculated on the daily outstanding balance and charged monthly. You are only charged on what you use, not on any un-drawn portion. This reflects the quality of your business and debtor book.
The beauty of this facility is that depending on your business and needs, the facility may be confidential and your debtors will be none the wiser or alternatively you could get the full service which includes a professional credit controller working on your behalf, without having to employ somebody full time.
At Omega Finance, we deal with a number of specialist providers in this field and the beauty of this facility is that it can work alongside your traditional banking lines with minimal disruption. It's not suited to all businesses. So, the key qualifying criteria is that the business must sell to other businesses on credit terms, invoice for completed sales and turn over more than $100,000 per annum. Businesses that manufacture, wholesale and business services e.g. labour hire, security, transport, cleaning and printing are great examples of businesses that are most suited to this form of finance. If you think your business could benefit from an exploratory conversation, give us a call.
