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Stories Tagged ‘Costs’

Invoice Finance is available in Newcastle from a large selection of lenders.

The challenge is to find the best lender to meet the needs of your Newcastle based business.

This will depend on a large number of factors including your financial status, turnover, sector, how you raise invoices and who your customers are. Each invoice finance company has their own individual criteria and characteristics and because of this there will be on particular lender who is best suited to meet your needs.

Smart Factoring Quotes understand each lenders criteria and capabilities. This allows us to source the best possible facility for your business.

Smart Factoring Quotes were approached by a residential care provider just outside Glasgow.

They were keen to source factoring Scotland. They were paying staff on a weekly basis but were having to wait a considerable amount of time to get paid by the local authorities.

We explored several options for them including full factoring, CHOCS and invoice discounting. As the credit control was not really an issue they decided that factoring was not good value as they were paying for a credit control service they just did not need.

We were able to source an invoice discounting facility that was much cheaper but still met all their requirements.

We have a lot of clients in Scotland and have an excellent network of lenders covering Scotland.

Fixed fee factoring is ideal for businesses looking for a single flat monthly fee when factoring.

Research has shown that small businesses find factoring charges confusing and unpredictable. Fixed fee factoring takes away this confusion by combining all the charges into an easy to understand single monthly factoring fee. It is easy to budget for and provides a valuable boost for the cash flow of a small business.

It is ideal for a business with a fairly smooth cash flow. However, if your turnover is more variable you could find yourself paying the flat monthly fee in a month where you have not had any turnover in which case you would be paying for nothing.

An alternative to fixed fee factoring could be a bundled fee deal. This is a single fee but is charged as a percentage of each invoice with no minimum fees. It is arguably as easy to understand as a fixed fee deal but is more flexible.

Cheap factoring for small businesses is now available. Typically the minimum fees levied by lenders made factoring particularly expensive for small businesses with a turnover less than £500,000. Some may argue that there is no such thing as cheap factoring no matter how big your business is but I believe that a cost effective solution now exists.

At Smart Factoring Quotes we have a bundled fee solution which means that you pay one simple fee as opposed to a seperate service fee and discounting fee. For a recourse factoring facility this fee is 1.95% of the each invoice. If you wish to include credit protection to protect you against bad debts this fee increases to 2.95%.

This has been well received by virtually all small businesses that I have spoken to. The benefits include:

  • up to 85% prepayment against your invoices providing valuable working capital for your business
  • no minimum fees which can prove expensive when turnover dips
  • easy to calculate fees which can easily be priced into your product or service price
  • optional credit protection to protect you from bad debts

Typically my advice also includes an explanation about hidden costs as detailed in other posts on this forum but with this facility it is easy to use, transparent and easy to understand.

Smart Factoring Quotes are proud to announce the launched of their new and improved website.

Our aim has always been to provide business owners with a balanced view on invoice finance. The new site is more informative and we want to be the preferred source of online information for business owners looking for an invoice finance facility. We want to empower business owners to make an informed decision. That informed decision can be about choosing whether or not to use a form of invoice finance, which facility to use or which lender has offered the most competitive terms for their business.

If you are a business owner who is considering entering into an invoice finance agreement or reviewing your existing arrangements make Smart Factoring Quotes your first port of call.

I quite often speak to businesses who are considering whether to use invoice finance or an overdraft. They will usually ask which is the cheapest.

In short an overdraft is almost always cheaper than an invoice finance facility. I have read on other websites that the interest rates are lower for an invoice finance facility than they are for an overdraft and I would agree. However, the interest or discounting fees on an invoice finance facility is dwarfed by the service fee costs. By way of a simple comparison an overdraft may attract a 1% arrangement fee so for a £100,000 overdraft the arrangement fee is £1,000. This is compared to a £100,000 invoice finance facility where a 1% service fee could be levied against the gross turnover of the business. If the VAT inclusive turnover is £1m then the annual service fee is £10,000.

So is an overdraft cheaper? Typically yes.

So why would a business use an invoice finance facility? In short because an overdraft is not available. Banks no longer secure overdrafts by way  debenture where the major asset is the debtor book.

Therefore for many businesses an invoice finance facility is the only option. If you are one of these businesses looking for a working capital facility to ease cash flow pressures it is important to consider your options. Whether you are factoring or invoice discounting it is important to remember that the lenders are not the same. They all have very different capabilities, criteria and pricing structures.

Settlement discounts can make a very valuable contribution to the bottom line of a company. I have recently looked at 2 invoice finance requirements where the companies were looking to access cash with a view to taking advantage of settlement discounts from suppliers.

One company was able to negotiate a discount of 5% and the other was able to negotiate a discount of 3%. Given their turnover this discount made a considerable contribution to their profits. This has to be compared to this costs of an invoice finance facility but in both these instances it was a viable model for increasing profits.

It could be worth exploring what settlement discounts are available to your business from it’s suppliers. Remember to explore what invoice finance options are open to your business and be sure to understand the full costs involved.

Invoice finance can indeed increase profits. However, it is important to remember that it depends on what you do with the cash that the facility generates. It definitely increases your costs as you will have the invoice finance fees to pay so you will need to generate enough ‘new profit’ to cover these additional costs.

These new profits can be generated from new sales that took place because you were able to purchase more stock, fulfill more orders or perhaps pay more staff which will generate additional sales.

I have also dealt with clients who are able to take advantage of substantial settlement discounts. Any saving available that is more than the invoice finance costs leads to increased profitability.

In short yes invoice finance can lead to increased profits. However, that will depend on your own entrepreneurial abilities.