Is Invoice Finance Expensive?

“Thanks for the finance offer but my accountant says that it looks expensive” I hear this all the time. Expensive compared to what? What is their suggested alternative?

 

A lot of what we do is invoice finance related. If we have quoted a business it will be done having taken a market comparison and based on facilities that are structured properly and will work. Is it cheap? No. Will it help you grow your business and achieve more profits? Very probably if you are using it for the right reasons.

 

It is all well and good saying “It is too expensive, don’t take it” but at least offer a comparison or an alternative. Ideally, the advice should include doing forecasts of what can be achieved with a facility and without a facility. Is it viable? Does the facility allow more profits to be made even after the additional funding costs? What are the risks to the business?

 

“Invoice Finance is more expensive than an overdraft”. Yes it is. Is an overdraft available to you? Probably not. Despite numerous invoice finance providers and brokers trying to claim that invoice finance is not more expensive than an overdraft, it is. No doubt. However, for B2B businesses invoice finance is more readily available and is more flexible when it comes to growth.

 

Yesterday I was approached by a business that has received 3 purchase orders from a major supermarket for €11m. Their margins are good but they need cash flow to pay a supplier. The solution is likely to look expensive to some. However, it will allow them to take advantage of a great opportunity and even after finance costs it will be very profitable. In many ways, the cost is almost irrelevant.

 

If you would like to know what “expensive” but competitive finance solutions are out there to help your business make more profit please get in touch.

 

Disclaimer: This is in no way aimed at all accountants or any individual. Just an attempt to be slightly edgy and avant-garde. 🙂