Dec
20
There are several reasons why a business might choose to make use of invoice factoring rather than opting for business loans.
Factors will look at how creditworthy a business’s debtors are, rather than the creditworthiness of the business itself. Therefore, it can often be the case that funds will be made available by factoring companies when they would not offered as business loans.
The cost of a bank loan could be less than the cost of invoice factoring, but there are key differences in the terms and conditions that will apply to the business, depending on which facility they use. It may be that restrictions are placed on a business taking a bank loan that would make it difficult to operate in the way that it chooses. A factoring company might be chosen instead to maintain flexibility.
Taking the cost into consideration, factoring can be a method of wealth creation within itself, particularly if there is a good margin between the cost and sale price of the product involved. If finance cannot immediately be obtained elsewhere, invoice factoring can allow a business to continue growing when otherwise it might be forced to slow down.
If a bank loan cannot be obtained, factoring might also be chosen above alternative methods of finance such as venture capital. Other forms of finance often cost more and could take too long to obtain. Alternatively, different types of financing can be combined or invoice factoring can be used as a bridging facility while other finance is sought.
Dec
10
Selecting an efficient invoice finance service takes some careful research. One of the most respected invoice finance brokers is Touch Financial. Touch Financial works with your business to help you grow more quickly without waiting for customers to pay. By working with over 20 UK lenders, they work to find the most effective solution for every individual business. Touch Financial understands businesses are different and there isn’t a one size fits all solution. This is why they provide both factoring and invoice discount options with varying rates and requirements.
Factoring
Touch Financial acts as a broker to provide invoice factoring services to businesses that meet certain requirements. Factoring available to both large and smaller businesses. This service is best for businesses without their own in-house credit management department. The main fee associated with factoring is called the service fee, which is only a small percentage of what is borrowed.
In most cases, you can expect to be able to borrow between 80%-90% of the invoice value from a lender. This allows you to put the majority of your outstanding invoices back into the business in as little as a day.
Invoice Discounting
With factoring, the factoring company actually handles your sales ledger for you. This also means your customer details are known by them and your customers must be informed of this. With invoice discounting, you handle your ledger and everything remains confidential. Your customers’ never know you are using the service. After you create a special bank account, you place in it the money you collect. The discounter then pays you the rest of the invoice minus the lending charge. This service is only for larger businesses with a high turnover rate.
Why Touch Financial Invoicing?
Touch Financial invoicing solutions are perfect for businesses of all sizes. By working with multiple lenders, you receive the best rates possible for your situation.
Nov
27
For businesses operating today, the payment of invoices for services or goods supplied can present a problem. For the majority of the time your clients may pay your invoices quickly and efficiently, but this may still result in waiting for several days to receive payment. As a worst case scenario, you might typically wait several weeks for sales invoices to be paid, consequently slowing down your cash flow whilst capital is occupied by the non-payment.
For most businesses the option of debt factoring is a very viable solution. By taking unpaid invoices and essentially selling them to a third party, you can free up much needed cash at a much quicker rate. The debt factoring company will typically pay a percentage of the invoice as soon as it is sent. This makes the funds available to your business within 24 hours, meaning you have access to the money much more rapidly in comparison to if you had waited for the invoice to be paid directly from the client.
Debt Factoring can also provide you with much needed support when it comes to credit controlling. They can communicate with your invoiced clients, being the point of contact for payment and also chase payment if it becomes necessary. As well as this, they can also offer much needed insurance against non-payment of invoices. This ensures that if a company cannot pay an invoice, your business will not suffer as a consequence.
Nov
22
Touch Financial Support is the largest invoice finance broker in Britain. It was founded in 2008, following the merger of Telford Jones and Simply Business and is part of the SFP Group of companies, based in Canary Wharf, London. Its website offers a valuable ‘Knowledge Base’, which is chock full of useful financial information for businesses. It is a member of the Financial Services Bureau (FSB) and the Asset Based Financing Association (ABFA)
How Touch Financial Factoring Works
The company’s financial services range from commercial mortgages to providing financial securities for import and export companies, but this article concentrates on their factoring services. A helpful infographic on their website describes how the service works. They will help put you in touch with a lender and provide ongoing support. The company is paid on a commission basis by the lender, who pays for each introduction, so their service will not cost you a penny. Once Touch Financial has found you a suitable lender, you send that company your invoices and they will pay you 80-90% of the value of the invoice and chase the creditor for the full amount. Once the invoice is paid, the lender will give you the balance, minus any charges. Touch Financial recommends the process as a solution for any small business with a turnover of more than £50,000, with no in-house credit department and whose principal asset are its invoices.
Touch Financial Services is partnered with over 20 of the UK’s leading factors (lenders). They include Lloyds TSB, the Bibby Group and Venture Finance. The Invoice Financing Forum has praised their innovative business model, but has expressed some concerns over their treatment of clients, raising questions about whether they really try to match clients to the best lender or whether there are other factors influencing their choice. However, no customer has backed up these claims, as far as this author can ascertain.
Nov
8
Cash flow is crucial to the smooth running of a business. The yearly profit reports can be a good indicator of performance but the truth is that a company has to operate every day of the year and this means that money must be available at all times for paying employees, investing in stock and assets, and covering all overheads. In many businesses, cash does not come in totally smoothly every day or week in a uniform fashion and instead big payments tend to come in clusters with large gaps in between. This can affect industries such as manufacturing, construction, or even fast paced financial companies where ready availability of cash can make or break a tricky deal.
Invoice financing is a tried and tested method that has been in existence since the late Middle Ages and has a strong history of smoothing out cash flow. It has its origins as a method for traders to keep running in between shippings of goods, as there was often a very long time between payments. The tradition of invoice financing as an alternative to loans has continued to this day.
Invoice factoring uses the outstanding debts on a sales ledger to provide cash for a company. The financing company agrees to pay the business a certain percentage of the value of the debts, often up to 90 per cent. In return, the company takes control of the ledger and chases up the debts from the clients, receiving the full value and thus earning a profit. In addition, some factoring companies offer a financial processing service whereby they process the sales books. This can be extremely helpful for smaller companies who do not have their own established administration departments.
Financing using invoices is a relatively safe method since only outstanding payments can be used to create ready cash. In the case of invoice factoring, it can even help to improve profits by reducing accounting overheads. The downside is that clients will deal with the factoring company for payments, possibly altering client-business relations. For a service that does not involve this, use invoice discounting.
Oct
24
Invoice factoring will enable around 80 percent of the money on the company’s debtors list to be released up to 60 days before it is actually due for payment by its customers. This article is intended to explain some of the benefits of invoice factoring.
The first benefit is that you gain almost instant access to money you have already earned, without having to wait for the invoice to become payable and subsequently having to chase the customer for it. By borrowing the money you can keep cash flowing consistently through your business, which will keep it financially healthy.
Secondly, you can usually borrow as much or as little as you need, depending on your company’s specific needs. Of course, the maximum available is dependent on the amount owed on the debtors list. You could choose to borrow less than this; the actual amount is down to you.
The third benefit of invoice factoring is that you do not need to waste time and money on credit control, chasing money owed from customers over the telephone or via email. This frees you and your employees get on with more important core tasks, such as increasing sales and growing the company.
A final great thing about invoice factoring is that absolutely no other assets are required in order to secure the funding. Invoice factoring gives you easier access to cash than approaching your bank and asking for a traditional loan.
Oct
18
When a business chooses a factoring company it can expect to pay factoring costs in the form of a fee or a commission for performing the agreed upon credit and collection services. Typically, the commission or fee is between 0.1% and 0.3% of the sales.
What determines the factoring costs charged to a business are numerous and noteworthy. First, the very nature of the business, including seasonal elements, product stability, market sector (wholesale or manufacturer) and styling considerations, is the single most important element in establishing factoring costs.
Sales volume is another aspect examined for determining factoring costs. Factoring applies a sliding scale based on annual sales volume of the client and percentages decline as volume increases. Sales volume per customer also affects the percentage. The more concentrated the customer base, the smaller the percentage because there is less work and follow-up with fewer customers.
Size of orders can predetermine some factoring costs. The profit margin of large orders filled over the same time as it would take to process a small order is significant; fees can be lower with larger orders from the customer base.
Other factors such as client credit worthiness, selling terms and billing practices can affect the fee or commission charged by the factor for factoring costs. If selling terms are long and the credit is substandard, the fees will rise in accordance with risk.
Moreover, factoring companies do charge interest for funds disbursed. It is generally a rate above the base rate established by the Bank of England.
Oct
2
Selecting a factoring company that is suited to your business is undoubtedly crucial both for your business and your peace of mind. There are so many service providers available to you, including independent factoring companies, subsidiaries of banks and other financial institutions. As you will want to make the most informed choice available, investing some time studying the market and identifying what your company needs most from your factoring partner is imperative.
First and foremost you should be reassured that the factoring company has a detailed knowledge and experience within your sphere of operation. Many factors seek to provide specialist services for particular markets and it is important that the company you choose can operate effectively within yours.
Many factors wish to set monthly minimum transactions, ensuring that they will have a certain volume of invoices presented to them. This procedure is fine in theory and will normally attract better terms for your company. However, if there is a dip in sales then you may be liable to make up the cost. Finding a provider who does not insist on minimum transactions might be better for your company.
Fee structures can vary greatly across the industry and shopping around will prove most beneficial. Many fee structures are complex and a company providing a transparent fee structure is preferable and avoids any potential for disputes.
Perhaps the most crucial aspect when selecting a provider is finding the factor that provides the services most appropriate to your specific needs. You might want to balance the cheaper cost of a company who takes a more impersonal mass approach to one that might be slightly higher in cost but holds a more inclusive ethos.
Sep
27
Businesses often look to outside investment in order to expand or improve cash flow. This might involve asset based lending whereby a business takes out a loan against a financial asset. In most cases this may be a perfectly reasonable way to improve a business, but for some, asset based lending might not be the most viable option.
An alternative way of raising cash is debt factoring. This process involves the borrowing of money against unpaid invoices, using them as collateral for the loan. The debt factoring company, or factor, provides the business with a percentage of the invoice amount and then procures payment from the invoiced client as repayment for the loan.
Companies who need money from a bill as soon as it is invoiced often use this service. This is opposed to waiting for the client to pay it, which can sometimes take a number of weeks, at which point it can become difficult to chase. A factor can also help with this, communicating directly with clients on the businesses behalf, and ensuring payment is made.
If payment is not made, however, there is an additional service a business has the option to take, as insurance against this downfall. A non-recourse factoring agreement can be made with the factor. This ensures the payment of an invoice to the business even when the client has failed to make the payment themselves. Through this agreement, the factor becomes responsible for the invoice payment and therefore your business does not suffer as a consequence of it not being settled.
Sep
17
Cash flow within a business can sometimes be problematic, especially when money is tied up in invoices for work that you are waiting to be paid for completing. Factoring, or debt factoring, as it is commonly known, can help with freeing up this cash in order for it to be injected back into the business as soon as possible.
The practice of debt factoring, fundamentally, is the process of selling one’s invoices to a third party. When a business completes a piece of work or provides a service, it can often take time for them to be paid and this occupies money that may well be needed, often sooner rather than later. Debt factoring helps to release this money much more quickly into the business so it can be used as needed. A lot of businesses prefer this approach in comparison to relying on a business overdraft as it can be easier to organise and there is no definitive limit to the amount that could be borrowed.
As well as being useful to a business by helping to release funds more rapidly (usually within 24 hours), it can also help cut administration costs. The debt factoring company can provide a further support service, meaning they can chase invoices in order to procure further payments, saving you the hassle of having to do so. They can also supply insurance cover, protecting you against payments that are not received, meaning that you will still obtain the balance.
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