Why Should You Review Your Invoice Finance Facility on a Regular Basis?


There are several reasons but in short it can reduce your costs and improve cash flow. We would welcome the opportunity to review it for you so please contact us on 0845 251 4040.

Let’s take a look at a few of the reasons why you should review your invoice finance facility on a regular basis. We will also discuss a few examples of actual cases we have dealt with.

Your business may have grown considerably since you started the facility.

This is a common mistake that businesses make. They scour the market for the best deal and then 5 years later they are still with the same provider on the same rates. If your turnover has increased dramatically you could be paying well over the odds for your finance facility.

A major variable when pricing an invoice finance facility is turnover. Typically the higher your turnover is the lower the percentage service fee you will pay.

We had a client who had been an invoice discounting client of a major high street bank for 5 years. When he had set up his facility he had a turnover of roughly £1m and had a service fee of 0.8%. 5 years later our client had a turnover of £7m + VAT and was still on the same rates. We reviewed the facility and obtained a service fee of 0.22%. This equated to an annual saving on the service fee of roughly £45,000!!! This is a considerable saving and immediately the business could forecast an additional £45,000 of profit for the year ahead.

It is imperative you review your facility if your business is growing rapidly.

Your business may have changed since you started the facility

The terms that are issued to you when you start an invoice finance facility are based on your turnover, number of customers you deal with and other variable but also on what you actually do as a business and the processes that you have in place for raising invoices.

As your business grows and develops it may be that the type of business that you do changes.

We had a client that installed air conditioning units for large construction projects. They bought the units direct from the manufacturer and then installed them as the project required. They would typically be raising invoices or applications for payment in stages as parts of the overall project were completed.

The business was on a prepayment of 55% because lenders do not typically like contractual work completed in stages.

The business had however changed it’s business model. When they approached us they were cash strapped and growth was restricted. Instead of supplying and installing the units they were now simply wholesalers selling on to other contractors so in effect were supply only.

As they were in effect operating on restricted funding and paying a premium for it we could easily find them a facility with an improved prepayment levels and reduced pricing.

Your requirements may change

As a business when you set up an invoice finance facility you may have certain requirements in terms of the services you require. For example if you have a small business you may find the outsourced credit control function that factoring provides a useful service and as such you will be happy to pay for this service. This may change as your business grows and you employ more people.

We had a client that had a temporary recruitment business. When they had started out as a 2 man band they had opted for a recruitment finance solution which provided a full back office service. This included invoicing, payroll and credit control and was ideal for them as a small business that wanted to focus on sales.

The business had grown successfully and had a turnover of £6m + VAT. They had their own financial controller and an accounts assistant but were still paying for the services outlined above. They were paying over £200,000 a year for these services.

In speaking to them it was clear they had the capabilities to take everything in-house and really just needed access to finance. We set up an invoice discounting facility with projected costs of less than £60,000 per annum. This provided our client with a saving of over £140,000 which will go straight on their bottom line and will make a significant difference to the profitability of the business.

The market may have changed

The invoice finance market changes on a regular basis. New lenders enter the market, existing lenders introduce new products and lenders come up with offers such as ‘won’t be beaten on price’.

Appetite for certain industries can also change over time and if you are in a popular sector for the invoice finance market lenders may be keen to win your business by slashing prices.

A good example of this is the permanent recruitment market. We have seen appetite change from lenders not wanting to assist at all to them offering a 50% prepayment. As the knowledge of this sector grew and perceived risk reduced there are now lenders offering the permanent recruitment sector a 70% prepayment against invoices.

Whatever stage your business is at, it is imperative that you review your invoice finance facility and your own requirements on a regular basis. Loyalty does not always pay so do what is best for your business and review your facility today. Contact Funding Solutions on 0845 251 4040 or complete our quote form.