Frequently Asked Questions
How much does invoice finance cost?
Costs are dependent on a range of variables – for example the type of facility, the number of customers, the number of invoices and the turnover. Usually there is a set up fee, a service fee (dependent on turnover), and a discount fee, which is charged on the cash which has been drawn down in advance. This is calculated in the same way an overdraft would be.
How long will I tied in for?
A standard agreement is 12 months with 3 months’ notice. However the market has been moving away from this and you can get contracts now with no tie in – and just 1 month’s notice.
What are the differences between factoring and invoice discounting?
Both types of facilities work by lending money against outstanding invoices.
Factoring is usually a disclosed facility ie your customers are aware of the funder’s involvement and make payments direct to the funder. The credit control of the sales ledger will also usually be carried out by the funder, including issuing statements and allocating payments. This has the major benefit of freeing up your time to get on with running your business.
Invoice Discounting allows you to carry out the credit control yourself with the funds being paid into a Trust Account. It can be run on a confidential basis if required. The business usually needs to have a trading history to be suitable for Invoice Discounting and must be able to produce management accounts on a regular basis. It tends to be more suitable for larger businesses or where there are a very high number of invoices.
I need to move to larger business premises but I work with the general public – how can I raise some additional cash?
Receivables finance won’t be appropriate for your business but you could look at refinancing your equipment if appropriate ie asset finance.
Another alternative is to look for a business loan – whilst they can be unsecured it is more likely some form of security will be required eg a property or other assets such as directors’ pension plans.
We have a number of partners who can help you source asset finance or cashflow loans.
Why should I use a factoring broker?
There are over 50 receivable finance providers working in an ever-changing market today and each funder has their own guidelines for the type of business they wish to support. A broker’s role is to keep up to date with this information and develop strong working relationships with the funders. Then, by taking the time to understand your needs they are in the best position to be able to introduce you to the most suitable options for your business. By utilising the services of a broker you are saving yourself time and money.
How long does it take to put a facility in place?
A factoring facility can be put in place in a matter of days if necessary, but usually 10 -14 days is an average, providing the funder gets access to the information required.
How much funding will I get?
Typically funders offer between 75% and 85%, but it can be increased in certain circumstances or sectors eg temporary recruitment may get 90% advance. Some types of debts though will attract a lower rate of funding eg contractual debt, including construction related invoices may be offered in the region of 20% to 60%. The balance gets paid to you when your customer pays. It is important you think about how much you actually need and what would be advantageous to your business.
If I work in the construction sector can I use factoring?
Usually yes. If you are working for other businesses then a number of our partners can help. Some will fund against applications for payment and others against stage or completed invoices. We need to understand how your business operates and how much funding you need so give us a call to discuss your exact requirements.
How much will it cost me to use a broker?
Cashflow Finance Solutions will not charge you – our time and advice to you is free. Should you begin to use a facility with a funder we have introduced, then we would get an on-going commission from them.
Once I start using a facility how long does it take to get finance against an invoice?
Most funders operate online systems and once the invoice is logged on to their system you can draw down against this between 24 and 48 hours.