I spent 10 years in the invoice financing industry at HSBC and saw the reality of how this form of finance can help small businesses. This month we heard that this form of funding has increased by 60% over the last 12 months which is not entirely surprising given that the economy has recovered recently but banks are reluctant to agree loans and overdrafts.
Invoice finance is particularly helpful for growing businesses as the facility grows with the business avoiding the time consuming, slow, and expensive process of frequent negotiations with the bank manager. Businesses are free to meet their potential because of the great flexibility that invoice finance provides.
During the very nasty recession in the early nineties I saw businesses that had their overdraft facilities removed, so they resorted to using invoice financing as an essential safety net. Without invoice finance these businesses would not have survived to benefit from the growth seen after that recession ended. Many became extremely successful because they were able to ride out the recession because they were properly financed.
When choosing any form of funding it is important there is a correct fit with the nature of the business and the experts in the invoice financing industry go through this process before they offer a facility to the business. They also explain the operational requirements to be sure that the facility will be sufficient. See three providers to see what each has to offer before you make your decision.
The amount that can be borrowed is a percentage of the ‘approved’ invoice value. This can be up to 95% but varies greatly depending on the nature of your business. Invoices need to be undisputed and for products and services which have been delivered. Most financiers require the whole sales ledger to be ‘assigned’ to them. In this way they have the security of the total amount owed to the business and the business owner maximises the amount they can borrow.
The relationship with an invoice financier is ongoing, with regular uploads or reviews of your invoicing and collections so there is an investment in time and an administration fee based on a percentage applied to your invoice value as well as the interest on the amount you borrow. It is worthwhile provided you receive the funding you need, you are expecting to grow and your margin is sufficient to absorb the percentage administration charge.
It’s always nice to reward your employees, especially those who may have worked for your business for a long time. Find out how you can do this and still reap the tax benefits.
If you want to grow your exports then the government want to help you on your way with Finance, Insurance and opportunities to meet potential customers. Yippee!
There’s a hidden gap in skills and knowledge between those of us who are qualified Accountants, and those who refer to themselves as Accountants. Every day we make an investment in your business to ensure you receive the quality of advice you need to protect your business.
It’s January and its ‘National Pay Your Self-Assessment
Your tax return should be safely in the HMRC net now but if you didn’t file before 12th December you will not receive a statement and payslip in the post. In any case, it’s best to brace yourself for making the payment as the statements are drip feeding very slowly through the postal system as I write.