Invoice finance can provide entrepreneurs with the cashflow they need to grow their business and provide a source of recurring revenue for brokers. So, what do you need to know?
If you work with clients who own their own business, invoice finance can provide vital tool to help them manage their cashflow and provide you with recurring revenue.
Cashflow is king for any business. Even the most profitable businesses can run out of cash and opportunities for expansion often depend on having money readily available to invest up front.
Invoice finance can help trading businesses to manage their cashflow by providing cash at the point of invoice in exchange for a percentage of the sum due. There are two main types of invoice finance:
With factoring a lender will look at the debtor book of a business and take a percentage of the qualifying invoices in return for making payment upfront and managing the credit control. This effectively means that the lender will issue and chase the invoices and then take payment on those invoices. Not all debtors to a business will be factorable and a lender will review the business and its debtors to ascertain the approach it will take.
Sometimes known as confidential invoice discounting, this approach is used with bigger companies that might not want their debtors to know that they are accessing invoice finance. With confidential invoice discounting a company will retain management of its own credit control and can exercise more flexibility with its terms. A lender will therefore want to ensure that the business has appropriate processes in place and, for this reason, invoice discounting is usually only available to larger businesses with a turnover of at least £500k.
It is worth noting that not all debtor books can be factored or discounted and that fees are negotiated by lenders on a case by case basis. As there is no tangible security, loans can be processed quickly – often within a week, and lenders pay an upfront fee to brokers plus a fee for every advance. This can provide a source of recurring revenue, which can help to strengthen your business.
So, if you are working with business owners who would like access to more cash, pick up the phone to Brightstar and we can discuss the best solutions to help them release cash from their debtor book.
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READ MORE OF THIS MONTH’S EZINE CONTENT:
LATER LIFE LENDING
SECOND CHARGE MORTGAGES
SPECIALIST RESIDENTIAL MORTGAGES
SHORT TERM FINANCE
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