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02 Sep

Cash flow problems »

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Cash flow problems within your business can be solved by looking at several solutions.

Some of those solutions for cash flow problems are financial solutions and involve borrowing money or restructuring existing facilities. The others are operational changes in terms of how you operate your business. Let’s look at each of them briefly:

Working capital facilities

You could look at an overdraft, invoice discounting or factoring facility. If one of these is already in place you could look to restructure to ensure the maximum amount of cash is generated for the minimum cost.

Asset Refinance

If you have any assets within the business you can look at refinancing these assets. This will mean an injection of cash however it can prove costly in terms of interest costs and you should consider the cash flow implications of the monthly repayments. If you already have asset finance facilities in place it may be worth refinancing to reduce the monthly repayments.

Remortgage

If you have a mortgage or an unencumbered property you could look to refinance this to raise money or reduce the monthly repayments.

Collect in money owed

If you have a debtor book it is important to ensure that debts are collected in on a timely basis. Your credit control skills could vastly improve your cashflow. Can you offer a settlement discount to get paid quicker?

Supplier Terms

Can you negotiate better terms from your existing suppliers or can you approach alternative suppliers with a view to obtaining extended terms?

Cost Cutting

Can you cut costs within the business by cutting out unnecessary services, insurances, staff members? You may need to make some tough decisions but you have to protect your business.

29 Aug

Cheap Factoring for Small Businesses »

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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.

20 Aug

Selective Factoring – Case Study »

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Selective factoring was recently set up by Smart Factoring Quotes for a security company based just outside Chester in the North West of England. They had landed a large contract worth over £400,000 over 3 months. They had to invoice monthly on 90 day terms and yet they were paying their security staff weekly.

They approached with a view to spot factoring the 3 individual invoices. We looked at their options and found that selective factoring was by far and away a cheaper option. Selective factoring means that you factor all the invoices of a particular debtor whereas spot factoring means you can pick and choose individual invoices. The difference in this instance is subtle but the difference in cost was dramatic.

Selective factoring worked out almost 10 times cheaper in this instance. The facility will allow our client to take on a lucrative contract and meet it’s weekly wage demands. Profits will be increased because of the selective factoring facility.

02 Aug

Invoice Finance or Overdraft »

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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.

29 Jul

Invoice Discount »

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If you are looking to invoice discount it is worth considering your options very carefully. Different invoice discounting companies operate in very different manners. Depending on how your business operates it could make a huge difference to the amount of working capital your facility generates and also how much the finance costs.

Let’s take a quick look at these 2 areas and see what can happen:

What can impact on costs when invoice discounting?

  • some companies operate a simple charging structure with just a service fee and a discounting fee. Other companies will charge for a variety of additional costs that are not always transparent. Additional fees can include set up fees, arrangement fees, audit fees, renewal fees, minimum service fees, minimum base rate and a whole list of other disbursements. I have been approached by some businesses where the disbursements were more than the main service fee. In effect this was more than doubling their expected costs.

What impacts on cash generated when invoice discounting?

  • beyond the obvious prepayment percentage are various variable that can impact on the amount of cash a facility generates
  • these include the overall facility limit, individual debtor limits, concentration limit, what invoices can be notified, the recourse period, etc..

Elsewhere on the forum I have gone into more detail but I just want readers to be aware that they should be looking beyond headline rates on both pricing and prepayment. It is imperative that any invoice discounting facility is set up properly and for that you need expert independent advice.

29 Jul

Invoice Discounting Newcastle »

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Invoice Discounting Newcastle – at Smart Factoring quotes we offer independent and impartial advice from our office in Ryton Village just outside Newcastle.

We were recently approached by a well known local fish wholesaler who was unhappy with their existing invoice finance provider. They had recently entered into an agreement with an invoice discounting company who after taking them on had moved the goalposts considerably. They had dropped the prepayment level and had also dramatically reduced the limit on the facility.

This was having a severe impact on our client the fish wholesaler in Newcastle.

e managed to source a new provider who was committed to providing a higher prepayment level and also a higher facility limit on a confidential invoice discounting facility. At the same time we managed to reduce their costs by 23%.

29 Jul

Scotland – Invoice Finance »

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Invoice factoring in Scotland is readily available. Scotland has several dedicated invoice finance providers but also has the opportunity to deal with several lenders south of the border. Scottish lenders include the major Scottish banks and also in Scotland are a few independent providers who actively targets businesses in Scotland.

At Smart Factoring Quotes we have experience of arranging both factoring and invoice discounting facilities in Scotland. Our most recent transaction was for a taxi company that was providing a service to local authorities and invoicing on credit terms.

We are aware of the issues surrounding Scottish registered companies and the laws pertaining to debentures. This means that we can introduce the lender that is best suited to meet your needs.

In terms of costs we understand each lenders capabilities and criteria and we aim to ensure that we set up a facility that is both properly structured and cost effective.

21 Jul

Settlement Discounts – Invoice Finance »

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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.

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