Factoring / Invoice Discounting

If you sell products or services on credit to other businesses, Factoring and Invoice Discounting, collectively known as ‘Invoice Finance’, are excellent ways to raise additional working capital. Both options leverage early funding from your sales ledger and can raise up to 80% of the value of each invoice you generate, paid within 48 hours of you issuing the invoice to your customer. The remaining balance is paid when your customer pays the debt, less fees from the invoice financier. In a factoring facility all the credit control is undertaken on your behalf (suitable for smaller businesses) and an invoice discounting facility is essentially the same, but you undertake your own credit control (often suitable for more mature businesses). Unlike a business overdraft with an agreed limit, which can be amended or withdrawn at the bank’s discretion, invoice finance funding grows directly in line with your actual turnover. This provides a far more dynamic cash flow solution which can also include bad debt protection. An invoice finance facility can be short term if required, and even cover a single invoice, or can be an on-going facility.

Trade Finance

If you have secured a purchase order from a creditworthy customer, a trade financier can provide advance funding to purchase the goods you require from your suppliers, enabling you to fulfil the order. This can include direct payments and letters of credit for domestic or international transactions, with the trade financier effectively acting as a guarantor that a supplier will receive payment so that your required goods can be released. A trade finance and invoice finance facility can be combined together, to provide a seamless funding solution from the point of order by a customer, to delivery and full payment of the goods by the customer. This type of finance is available to both young and mature businesses alike, and is dependent upon the end customer being both credit worthy and credit insurable.

Asset Finance

Asset finance is a secured term loan (hire purchase and leasing), which is used to finance business equipment. You can breakdown the payment for your assets into monthly, bite-sized chunks. This makes the investment much more affordable and has less of an impact on your cash flow. It also allows you to develop and grow your business without experiencing hold-ups while you wait for the cash available to make the purchases you need.

It is used to finance office and manufacturing equipment, yellow goods, cars and most other types of business assets. It is an alternative type of funding for SME’s and can provide significant cash flow and tax benefits for businesses looking to acquire new equipment.

Asset finance is a valuable alternative to conventional bank loans, and is typically secured on the asset being financed. Often at the end of the loan term the business has the option to replace or update the equipment on finance.

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