Fast growing businesses can often struggle to raise enough finance to keep up with their demand for working capital. The situation, sometimes referred to as over trading, occurs when a company is taking on new business faster than it can afford to fund that business. It’s a cash flow issue made even worse by late or slowing paying customers. Invoice finance is used by many businesses to manage the varying payment terms and taking a facility with a lender who understands your business and is keen to support you moving forward is invaluable. We’ve put together a few things to be aware of when you’re choosing invoice finance, followed by our product offering at the end so you can benchmark against other invoice finance providers. And we’ve included a case study on how one tech company is using invoice financing to great effect to build their business.
Some financiers will apply limits to your funding. These include:
- concentration limits
- drawdown limits
- export debt
- facility size
- withholding profit
Costs of Funding
Fees vary between financier – some have up to 34. These may include:
- setup fee
- service fees
- termination fees
- refactoring fees
- interest fees (also check how BOE base rate rises affect)
- fees associated with reviewing, renewing or increasing your funding
- administration and account service fees
- legal documentation and process fees
Larger technology businesses who have used or are using a form of invoice finance will be familiar with personal guarantees and lengthier setup processes, typically owing to the complexity of the facility.
If your business is choosing finance for the first time, here are some terms to familiarise yourself with:
- personal guarantee
- debenture (the name typically given to a security agreement that sets out the terms under which the borrower provides security to a lender.)
- contract length (ranges from no fixed term to fixed)
Process requirements vary between finance provider, it can be on an individual invoice, selective debtor, or whole book basis. Price can be based on the specific risk rating of one of your debtors or your entire ledger. You can choose to remain in control of your credit and collections process or outsource the management to the finance provider.
All financiers will offer demonstrations of their product / service. Here are some questions to ask during this phase:
- How does the credit checking process work?
- Who issues contracts?
- Am I covered in the event of a bad debt? How is customer service structured? What are they responsible for?
Accelerated Payments offers an Individual Invoice Finance service – you select which invoices to fund and when. We approve your customer and credit insure the transaction so in case of default you will still receive up to 90% of the value of the invoice.
- We finance on an individual invoice basis so there is no issue with concentration risks or drawdown limits (typical invoice amounts from $/€/£15K to 2M).
- We can provide finance against export debt
- Up to 80% of the value of each outgoing invoice is immediately available as working capital.
- Accelerated Payments provides the final balance payments when clients settle the invoices
- Log in to the customer portal for full details of every invoice including a breakdown of all payments, including interest
- Credit insurance or bad debt protection is provided against all invoices included in the price
- Accelerated Payments does not require any personal guarantees, security or debentures
- All invoices are financed on an individual basis so there is no long term contract, you can use the facility as and when you need to
- Apply: Simply register online. We can have you approved within 24 hours.
- Debtor Approval: We review and approve your customers in advance
- Invoice Approval: Your customer verifies their invoices for payment using Accelerated Payments’ e-invoice platform
- Get Paid: Select invoices for advanced funding and get paid now while your customer pays later
- Settlement: Your customer pays into a designated bank account on due date. This account is in your company’s name
If that feels like a lot to take on board, or you are interested in finding out more, our expert team are available to talk you through the options vs your needs.
Case Study: Full Stack Resources
Toronto’s busy tech scene has a high demand for skilled programmers and other technology personnel. Our client Full Stack Resources successfully spotted and filled a gap in the market when it hit upon an original idea: offering a recruitment service to match skilled developers with vacancies, as well as a software development service that completes contract work for companies. But, as with all successful businesses Full Stack hit an increased working capital requirement: paying its developers directly, and an ever-increasing number of people on its further expanding payroll.
“We had worked with an invoice financing company, but we really needed more visibility and detail than they were providing, and that’s when we met Accelerated Payments. We immediately saw they had the solution we were looking for.” – Managing Partner Chris De Sousa