Which is the Best Invoice Finance Company for My Business?
The key words in this question are ‘my business’. There are over 50 invoice finance providers in the UK and each has it’s own capabilities and criteria. The best invoice finance company for your business will depend on several factors:
The Size of Your Business: certain providers specialise in providing facilities to smaller businesses with a turnover less that £250,000. Some bank invoice finance providers now will not provide a dedicated manager to you unless you have a turnover in excess of £6.5m. Arguably you will be paying for a service you are not receiving. Other lenders really focus on the larger end and will only consider facilities in excess of £1m or in some instances, much more. It is therefore important to choose a lender that genuinely wants your business. If you are too small for the invoice finance company they will not show much interest in you. If you are too large for them or at the top end of what they provide they will likely be nervous and restrictive with the funding.
Sector: some lenders have specialist offerings for certain sectors such as construction or recruitment. This can be a good thing but can also mean they will only offer you their specialist product which may not be exactly what you are looking for. Other lenders may avoid certain sectors altogether. These sectors can include construction, freight forwarding or permanent recruitment. It is important to choose an invoice finance partner that understands your sector and your business.
Location: it is probably wise to choose a lender that has an office relatively close by. That means that you can easily meet with them to develop an ongoing relationship. This is important as your business grows and develops. A lender that trusts you and understands your business will be far more supportive than one you don’t know.
Access to Decision makers: let’s face it, nobody likes to hear ‘my hands are tied’ or ‘it is more than my job is worth’. Dealing with people who are not empowered to make decisions can be frustrating. In the world of invoice finance credit committees can be common practice. However, there are lenders where it is far easier to access decision makers. This can make life much easier if you need and increased facility or an overpayment. Some lenders act as though the initial structure of the facility they set up for a business is set in stone. Any change to structure such as prepayment, debtor limit, export cap or concentration limit has to be hard fought and negotiated in some instances at a price. Pay Close attention!!
Structure is Everything – Know What You Require: a prime example mentioned above is concentration limits. Some lenders lose sleep if concentration is above 20%. This can have a material impact on your funding if your concentration is above this. Other lenders are quite happy at 100% concentration levels. Understand what your potential funder is happy with in terms of prepayment levels, concentration limits, export caps, etc… Think of what you need now and what might change going forward and give yourself a bit of headroom. Future proofing your facility is a very good idea.
Pricing – the best provider is arguably the one that will enable you to make the most profit. This means it provides adequate working capital to allow you to grow. However, it also means that costs must be minimised so that profits can be maximised. However, structure should typically come first or you will have a facility that restricts growth and frustrates you. What price grey hair?
Whole Turnover, Selective or Spot Invoice Finance – dependent on your invoice finance requirement you may wish to notify all your invoices, just a single debtors invoices or ad hoc invoices as and when you choose. The lenders that offer these separate types of facilities tend to be very different organisations.
Bolt on Facilities – do you require additional facilities alongside your invoice discounting or factoring? Some lenders offer trade finance, stock finance or purchase finance. To learn more about these products click here.
At Funding Solutions we speak to the invoice finance market on a daily basis. We understand each lenders capabilities and criteria. That means that after discussing your business and your requirement, we can recommend suitable lenders. This means that you will have genuine competition for your funding. This will ensure you get the best structure and the best price.
Contact us on 0845 251 4040