Invoice Finance for UK small businesses

For any small business struggling with tight margins, even apparently minor costs can make the difference between profit and loss. For example, collecting unpaid invoices can sometimes be both cumbersome and costly. Invoice Finance for small businesses, sometimes called factoring or invoice discounting, is a financial product that pays a high percentage of the unpaid invoice value in advance. It provides an immediate boost to cash flow and removes the cost and effort associated with chasing invoices. It works simply enough. A third party, usually called a factoring company or it could be your bank, takes possession of your unpaid invoices in exchange for a cash sum. Depending on the type and reliability of the invoices – they might be trades or perhaps public bodies – you receive an amount equivalent to perhaps ninety percent or more of the invoiced total. Factoring takes the process a step further by passing across the entire sales ledger management, while invoice discounting is simply a cash advance against unpaid invoices. In a more recent development, invoice finance for small businesses is operating through online auctioning systems. In essence the business looking to offload their unpaid invoices puts the package up for auction to a group of competing companies. Conceivably the winning bid could be close to or at a hundred percent of the invoiced sum. There are two websites offering this service: Platform Black and MarketInvoice. They have a number of advantages.

• They don't require a long term commitment. Invoices can be sold selectively as and when required.
• The balance of the transaction is with the seller who is able to set terms such as restricting the discount at which the auction starts.
• No personal guarantees are required.
• The process lasts a matter of days rather than weeks.

Like any finance system, Platform Black and MarketInvoice are not risk free. You can't offload invoices that you are sure won't be paid without some expectation that they might revert back to you. Nor should they be viewed as a debt collection service; it relies on a good measure of trust from both the seller and the auction winner. There is also a fee to pay, but at 0.5-2.5% of each invoice it is far cheaper than most Invoice finance companies. For all that, Invoice Financing and the introduction of schemes like Platform Black and MarketInvoice provide a good opportunity for small and medium business to make significant improvements to their cash flow situation. It serves to smooth out the peaks and troughs of cash in the business and can help to prevent the use of credit facilities at difficult times in the calendar. At Choice Loans we can assist you in getting set up on Platform Black and/or MarketInvoice at no cost to you. We have been working with both these firms for some time and can offer your business invoice finance advice on which is better for you. To speak to an expert either complete our Invoice finance enquiry form here or call us on 01494 410125.