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Invoice Finance

The site is still under development but it will compliment our existing site Smart Factoring Quotes.

The site is aimed at providing business owners with a free online resource that will ultimately help them select both the most suitable invoice finance product for their business and the most suitable invoice finance provider.

It is important to consider that whether you select a factoring of invoice discounting product the way it operates and performs will differ from lender to lender. This is based on the simple mechanics of how lenders operate but also on less obvious things such as a lenders reputation for communication. Some lenders will simply not return calls which can prove very frustrating while others have excellent reputations for customer service levels.

With our knowledge of the market we can help you navigate your way to the lender best placed to meet your needs.

Invoice Finance is the generic terms that describes both the industry and the product that provide finance against invoices that a business raises to other businesses.

Under the umbrella of invoice finance there are various products including:

Invoice Discounting – this is where a finance company will provide finance against the invoices raised by a business but the responsibility of collecting the debts in remains with the business itself. This type of facility can be either disclosed or confidential.

Factoring – this is where an invoice finance company purchases the debt from a business and not only provides finance but also provides the credit control function – i.e. they chase the debts. Disclosed factoring is by far the most common form of finance however confidential factoring can be sourced.

CHOCS – this stands for ‘clients handles own collections’ and operates in the same way as a factoring facility. However, the  factoring company allows the client to do their own credit control.

Beyond this there can be recourse and non-recourse facilities for all these types of facilities.

When choosing your facility it is important to consider what you require from the facility and then it is worth speaking with an invoice finance broker to see what facilities will best meet your needs. It is important to remember that each lender has it’s own criteria and capabilities.

Recently I have seen quite a few confidential invoice discounting clients looking for flat service fees. The most recent being a recruitment business with a turnover of £56m. I asked why the flat fee was attractive and was told it “impacted less on margins.” Who am I to argue with someone who has a built up such a large recruitment business and has been a user of invoice discounting for over a decade. I did however feel that it warranted a comment on the forum.

So what are the benefits of a flat monthly fee? Well I guess it is easier to budget and potentially cheaper for a company with a rising turnover but in reality the costs should not differ dramatically to a percentage based fee. The way the flat fee or percentage based fee is calculated will be the same for any lender anyway. Most lenders will arrive at a monetary service fee and then convert it to a percentage of gross turnover anyway.

There is obviously a requirement for flat fees though as one of the ‘new kids on the block’ Gener8 Finance use this as their USP.

Personally I can’t see the advantages but I guess it provides certainty and in times such as these something has to be said for that.

I would however welcome anyones thoughts on this……

Factoring in Ireland has become increasingly difficult in recent years as the economy and banking industry in particular has been hit hard.

Arguably when companies require cash flow facilities the most the Irish banks have not been in a position to help except in the most straight forward of cases.

There are however, several invoice factoring companies in Ireland who have stepped in to fill this void. As such Smart Factoring Quotes Ireland was set up to help Irish businesses find the lender best suited to meet their needs.

Construction Factoring is challenging for invoice factoring companies for a number of reasons.

Any invoice factoring company wants to know that the value of any invoice that they have funded against is secure. In the event of business failure they want to be able to approach the clients customer and request that the invoices they have taken good title to are paid in order to recover their position.

With this in mind if you consider how the construction industry operates you will see how this can cause issues for invoice finance companies.

In the first instance most contractors within the construction industry raise ‘applications for payment’ rather than invoices. As such invoice factoring companies cannot take good title to the applications in the traditional manner.

The work done is usually measured weekly, monthly or against specific milestones and as such applications or invoices are raised for a part completed project. Should the contractor fail to complete the project then liquidated damages can come into effect which render the outstanding invoices worthless. As such any invoice factoring company would not recover their position against these invoices.

Retentions at the end of the contract can also cause issues for invoice finance companies but these effect the prepayment level rather than the ability to provide funding.

Bad news for the construction contractor looking for a flexible working capital facility? Well, it is not all bad news. Smart Factoring Quotes have lenders who can provide invoice finance facilities to construction contractors. Get in touch today.

Cheap Invoice Finance Companies can be found but ‘cheap’ is obviously relative to other invoice finance providers. Invoice Finance will typically nearly always be more expensive than an overdraft facility, however Invoice Finance offers additional benefits such as flexibility. Smart Factoring Quotes do however have a few lenders at present who claim that they will not be beaten on price so why not help us test that theory for the benefit of your business?

Cheap invoice finance companies will offer the overall lowest fee structure once you have considered the service fee, discounting fee (including the base rate, minimum base rate and discounting margin), audit fees, set up fee, legal documentation fee, survey fee, etc, etc.. The list of additional fees from some lenders can be extensive and unfortunately not always transparent or easy to understand.

When selecting an invoice finance facility and provider my advice would be not to just shop on price. In the first instance you need to see which invoice finance providers can offer you a facility that works for your business and it’s unique circumstances. It is pointless taking up an invoice finance facility that will not provide what you need just because it appears cheap. Find which invoice finance providers can offer what you require and then do the price comparison ensuring you look beyond the headline rates and consider total costs. Remember you will typically be tied in for 12 months with an invoice finance facility.