Small business lending, including Invoice Finance, Equipment Finance and Development and Bridging Finance all grow strongly.
According to new figures from the National Association of Commercial Finance Brokers, several types of small business lending all grew strongly in the last 12 months to June 2016. Invoice Finance grew by 22.8%, Leasing and Equipment Finance grew by 10.5%, Development Finance by 49.8% and Bridging Finance by 74.6%. Overall, traditional forms of lending to small businesses grew by 30%. Over the same period alternative forms of lending, including crowdfunding and peer-to-peer lending fell by 14.4%.
This article looks at why one of these areas – Invoice Financing – has grown so strongly and gives a few tips on how to decide if it’s right for your business and how to get the best deal.
Are you thinking of using Invoice Finance for your Business?
In our experience, cash flow problems are the main reason why small and medium sized businesses in the UK get into financial difficulties. These cash flow problems are often caused by late payment of invoices. Invoice Financing could be the answer.
What is Invoice Finance?
If you run a business that has customer payment terms of 30, 45 or 60 days, the likelihood is that some of your clients are taking considerably longer to pay you – perhaps 45, 60, 75 days or longer. This can lead to significant cash flow problems, which invoice finance can help solve.
Invoice financing works by a business selling its invoices to a 3rd party finance factoring company, in return for receiving an up-front percentage of the value of each invoice, typically between 75% and 90%. In essence it is a form of loan to the business from the finance factoring company. There are two main types: Invoice discounting and invoice factoring. Click here to find out about the difference between the two.
What do Invoice Financing Companies look for?
Invoice Finance has grown strongly in recent years and is now a well established and successful form of finance for businesses looking to improve their cash flow. Typically, these are some of things that invoice finance companies are looking for in businesses:
- Is your company B to B? Most invoice finance companies will only provide finance to businesses that sell goods and services to other companies.
- Are your customers creditworthy? The invoice finance company will investigate the credit worthiness of your customers before it agrees to take offer you factoring or invoice discounting services.
- Minimum Invoice Amount. Often invoice finance companies have a minimum total invoice amount per month or per annum that they will deal with.
In addition, it is worth remembering that before an invoice finance company agrees to provide you with a facility it will do the necessary checks into your business to satisfy its own financial requirements.
How to find the right invoice company and what to do if you are struggling to be accepted
There are over 80 invoice finance providers operating in the UK right now, all of whom have slightly different products and terms. So finding the right one for your business can be difficult. This is where we, at Senate Money, come in.
We specialise in putting together applications for invoice finance and finding the best deal for your business. It’s also worth knowing that there are some very competitive invoice finance deals available at the moment, which could save you and your business a lot of money if you find the right one. All invoice finance companies are not the same. We’ll help get the best deal for you.
Contact us for Help and Advice With Invoice Finance
If you’re considering invoice finance as a means of finance for your business, contact us at here at Senate Money, or call us on 01675 443878 for a free initial discussion.