The figures show that although the number of companies using Invoice Finance stayed more or less the same the amount they financed grew by 9% to £16billion in the last quarter of 2011. The report suggests that despite the tough economic climate businesses that use Invoice Finance are growing, with exports being one of the strongest areas. This news comes on the back of another ABFA release in December 2011 which said that UK companies use more Invoice Finance related funding than any other country in Europe.

But despite this positive news the figures show that the majority of UK businesses opt not to use Invoice Finance to inject much-needed cash in to their companies and many experts believe a stigma about the service is to blame.

Simon Taylor, Business Developement Manager at TrackCompare.co.uk said “The number of UK businesses that use Invoice Finance facilities has been static for some years and the financial downturn has made little difference, despite the relative difficulty in obtaining credit through other means. The growth of SME’s is vital to the UK economy, very few businesses fully understand the benefits of Invoice Finance although almost all of them would like to release the cash tied up in their debtors list. Credit accounts are a weight around the neck of most businesses and Invoice Finance can change that over night”.

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New deals come on the market all the time and you could find an alternative invoice facility which will save you money. Here are a few ways you can save money on invoice factoring.

• Has your turnover increased? If so then you could probably obtain much lower service fees.
• If you have an invoice finance facility which is restricted, you may be able to obtain an invoice finance facility which gives you much improved cash generation.
• If you are paying minimum base rate then you will more than likely not be benefiting from the very low base rate which is in existence at the moment.

As with any financial products, the deals you can obtain fluctuate a great deal even over a period of a year. This is due to an ever changing financial landscape. It’s important to make sure you are getting the best deal you can, as the savings can amount to thousands of pounds over a 12 month period.

It’s also important to remember that you can approach your current invoice finance company with deals you have been offered by their competitors and they may be able to better the offer or at least match it. This will save you time and effort swapping to a new factoring or discounting provider.

To compare invoice finance services click here.

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One way to help with this problem is to look at invoice finance solutions. With invoice finance in place you can guarantee that you receive the vast majority of the funds before the payroll needs to be paid. If you have clients which you invoice every month then you can make sure these invoices are issued in time for the payroll.

If finding the funds for the payroll is a problem you suffer from on a frequent basis then it is worth looking into invoice finance. With your invoices factored you can receive between 80% – 95% of your invoices within 48 hours of issuing them. The cost of invoice finance varies so it is worth shopping around, but typically you will pay between 1.5% and 2% of the value of the invoices you factor.

You will need to structure when the invoices are issued in conjunction with the invoice factoring company.

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For these two reasons it brings to ahead the problem of cash flow and invoice finance companies can often find an increase in the number of enquiries for their services at this time of year.

The fact is that while businesses may be looking for a solution to their problems now, invoice finance contracts can take between a month and three months to put in place. It is by no means an instant solution to their problems.

There are all sorts of due diligence that needs to be undertaken by the invoice finance company before they can sign you up for a contract. It is for this reason that they insist you sign up to a contract, as there is a reasonable amount of cost and time incurred in the initial setup of an invoice finance facility.

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The banks attitude towards business finance is a much more careful approach than the government is had hoped for. The business lending targets set by the government are unlikely to be met by UK banks and this is not due to a shortage of demand.

Therefore it may be prudent for businesses to look for alternative finance solutions such as asset finance, invoice factoring, invoice discounting, debtor factoring, single invoice finance, spot factoring and construction factoring. These forms of finance are much easier to get as they are secured against particular assets or debts. In addition to this many of the finance companies that work in these fields are not high street banks with the same level of bureaucracy and strict lending policies.

Some of these less traditional forms of finance are looked down on by some business people, but in these financially challenging times you may have to question your preconceived ideas about certain finance options.

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1. Help you to negotiate a good deal.
2. Fully understand how your business works and your factoring needs.
3. Clearly explain the invoice finance options open to you and the costs involved.
4. Explain in full how the invoice finance solutions can work and what is involved.

A good broker should not try to hard sell you and should simply present to you the options that best suit your business needs and requirements.

Invoice finance can be very expensive. Not all invoice finance solutions will be best suited to your business. Along with the fact that you will more than likely be signed up to a contract for around 12 months you need to make sure you choose the right invoice finance solution for your business.

In short a good invoice finance broker is there to find the factoring service which is going to help cash flow and the growth of your business rather than hinder it.

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It is therefore vital that cash flow problems in this area are solved. One method of solving cash flow problems for SMEs is to utilise invoice finance. In todays uncertain economic climate invoice finance is much easier to come by for SMEs than bank loans or overdrafts.

Invoice finance can enable SMEs to access the funds owed to them much quicker and in turn can help them to keep trading and to press ahead with expansion plans and growth.

It is important that SMEs are aware of the various less traditional forms of finance such as asset based finance and invoice finance. While these do not suite all types of business they could be very helpful to many businesses if they only realised they existed. We rely on SMEs to a greater extent than many appreciate and we need to do all we can to help them not only survive, but thrive through these challenging times.

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That said you can get invoice finance companies that will give you a 30 day or 28 day rolling contract. This is very flexible, but you need to make sure that you are getting a good deal on your fees as you may pay more for not being tied into a longer contract. You need to way up the pros and cons of different arrangements that are available to you and make sure you shop around before you sign yourself up to any contract.

Sometimes you will have to pay a survey fee and arrangement fee, in these cases you will have a better argument to lower the length of time you are tied into a contract.

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The fact of the matter is that invoice finance is growing in popularity and is a perfectly acceptable way of financing your business. It helps cash flow and can help you to run your business more smoothly. More to the point it is often easier to get than more traditional methods of finance.

Despite this many businesses that utilise invoice finance still prefer to hide the fact from their clients. There are many invoice factoring services that will invoice your clients and chase payments confidentially so that they are unaware the invoice finance company is dealing with your credit control.

The only problem with confidential invoice factoring services which work seamlessly with your business is that they can sometimes be more costly or lack other important features. Therefore when you are shopping around for invoice factoring services it is worth taking into consideration all the other factors and features of each invoice factoring product.

Another invoice finance option open to you is invoice discounting. With invoice discounting you collect the funds yourself and the invoice finance company is purely there to help with the cash flow side of things.

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Our section below highlights what to look out for when considering an invoice discounting, factoring and invoice finance:

Minimum Service Fee

Minimum service fees are usually charged on a monthly, quarterly or annual basis. A minimum service fee is charged if the amount you actually turnover is less than what was expected. If the charge is applied monthly you could actually end up paying more because your turnover may not run smoothly from month to month (you may have months where it really peaks and months where it is minimal), or your financial institution may have based its quote on a yearly forecast.

Administration Fee

An administration fee is based on the gross amount of your turnover, and is usually a percentage value.

Setup Fee (or Legal Document Charge)

The financial institution that provides your facility will be hit with its highest costs when the facility begins so they will charge you a setup fee to try and recoup some of these costs on the day the facility starts. If there is no minimum term to your policy then expect to be hit with a higher start up fee, so the finance company can cover itself against companies that leave their polices early.

Re-Factoring Charge

A re-factoring charge is not charged by all finance companies but when it is charged, it is intended as a reflection of the additional effort the company needs to put in if one of your customers is very late in paying an invoices or invoices. This can be reasonable, as there are costs involved if legal action needs to be taken. However, you need to be careful because often the costs of legal action can outweigh the benefits.

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