How can I compare invoice finance deals?

As the credit crunch has tightened its grip on mainstream lending, companies have been forced to be more innovative in how they get funds and manage cash-flow. This has seen an unprecedented rise in many forms of finance that were previously just a small part of business life. One of these is invoice finance where there are now a dizzying array of options from peer-to-peer aggregators to spot factoring and more traditional longer term arrangements but which is best? Here we try and list some of the factors you should consider when deciding on an invoice finance deal.

1. How big/creditworthy is your business?: Invoice Discounting generally lends itself to established businesses with a turnover in excess of £500,000 pa. If your turnover is below this or you are a new start-up then factoring may suit you better. In addition, if you are a company with a good credit record then a peer-to-peer solution may be for you (more about that in the next point).
2. What kind of creditors do you have?: If you have blue-chip companies with strong credit ratings then you may benefit from one of the peer-to-peer aggregator solutions where your invoice is auctioned to the highest bidder. We can help you set this up very easily.
3. Cash-flow management: What are you trying to achieve? Do you just have 1 or 2 invoices that you wish to get paid now (in which case spot factoring or a peer-to-peer option may suit more) or do I want a longer-term ongoing arrangement to have all invoices paid early and better manage cash-flow that way (in which case Invoice discounting may suit better)?
4. Creditor management: Are you content with your credit control arrangements or would you prefer someone to manage this for you? If you're happy with things as they are then Invoice Discounting allows you do this; if you prefer someone manage this for you then Factoring generally works this way.
5. Anonymity: Many businesses do not want their clients to know they employ invoice finance to get debts paid sooner. Though many would say this shows a well-run business with prudent cash-flow management, a stigma remains for some. Be aware that while Invoice Discounting can be anonymous, Factoring generally isn't (though exceptions to apply).

These are the more macro issues to consider when deciding upon an invoice finance solution for your business. Once you have resolved these matters you can begin to look at specific deals and consider the more detailsed aspects of the finance being extended. The issues to weigh up here include:

• What is the overall cost of finance?
• What percentage of the invoice will the Lender extend?
• If a longer term agreement is offered, what is the tie-in period and what percentage of my invoices have to go through this deal?

The variables are many but what is certain is that an increasing number of businesses are now looking to invoice finance as a way to manage their cash-flow and it is an increasingly important finance options for SMEs in the UK. If you would like to discuss your invoice finance options with one of our Commercial finance team then please either call us on 0845 1260350 or complete our Invoice Finance enquiry form here and we will call you.