Steven Smith, Senior Consultant, Totum Finance writes, “The stigma previously associated with invoice financing is finally dissipating as businesses understand that utilising their debtor book for cash flow can be extremely beneficial.”
If you invoice other businesses for your services or products you may have to wait up to 60 days to receive payment. This can affect the cash flow of your business at a critical time.
Your invoice book is an asset on which you can raise finance to help improve cash flow. Invoice Finance is a structured and flexible way of raising funding against assets.
Data compiled by the Asset Based Finance Association (ABFA) reported the total amount of lending UK businesses secured through invoice finance has passed the £20 billion barrier for the first time, hitting a record £22.2 billion in 2016 (Q4), up 5 per cent from £19.3 billion in 2015. Over the past 10 years, the sector has grown by over £8 billion (2007: £14.1 billion). Despite this industry insiders believe that there is still scope for further growth in order to support businesses which struggle to get funding.
Case Studies
Acquisition
Client had grown successfully for 5 years and an opportunity to purchase another company in the construction industry came up. They had very little cash and no obvious security like property to use. After 6 months of negotiations, they agreed a price with the vendor but had only 4 weeks to complete. In this case an invoice discounter who specialised in the construction industry was introduced; they provided a loan to lend of 75% of the debtor book, allowing the client to complete the acquisition.
Funding Asset
A manufacturing company (the client) needed to purchase a new piece of machinery quickly in order to take advantage a reduced price, but the offer was time limited and required a large down payment. The client used their debtor book to raise the necessary funds. The company was thus enabled to manufacture their product more quickly and efficiently. The increase in their production capability meant they could accept and fulfil more orders each month, with a resultant increase in turnover and profits.
Spot Factor
A kitchen fitting company received a large order, the client had to procure the raw materials which would need paying for before the works were complete, and payment could be expected from their client. The kitchen company used the invoice generated by the purchase to raise funds to complete the order. Clients are often not aware that you can use a single invoice to raise funds, not every transaction requires the whole debtor book to be used.
Steven Smith has over 20 years of experience in the commercial sector, including the construction, healthcare, brewery and retail sectors. He says that helping businesses find funding when most of their primary banks are saying “No” is particularly rewarding. Steven likes the fact that as Totum Finance is an independent commercial broker, meaning that they are not tied to any particular lender, and only have to focus on finding the right solution at the right time.
He said, “At Totum Finance our focus is on overcoming your obstacles in gaining funding for your project, business or idea. With over 250 providers of finance in the UK, how often do you consider a different institution or platform when meeting your financial needs?
www.totumfinance.com