If your business is considering invoice finance this quarter and you require more information as to what securing this type of facility involves, then you’ve come to the right place. Read on for Touch Financial’s in-depth invoice finance guide to the questions most commonly posed to us by businesses about this key cashflow solution, including the start-up process, receiving your funding, eligibility criteria and much more.
1. What’s the difference between factoring and invoice discounting?
Both factoring and invoice discounting fulfil the central purpose of invoice finance, offering companies additional working capital by enabling them to receive a pre-arranged percentage of their invoices’ value from a funder, often almost instantly. Each of these two facilities has its own unique benefits, however. The main differences are:
- Credit Control – Factoring funders can help a company manage its sales ledger and chase debtors, a useful feature if it has yet to establish an in-house credit collection system
- Confidentiality – Invoice discounting funders won’t take on this responsibility, but can provide a confidential facility for any firms whose customers might consider invoice finance’s involvement cause for concern. The last set of published quarterly figures by the ABFA showed advances were heavily distributed to Invoice Finance – accounting for 82.4% of all asset based finance products.
2. How does the start-up process work and how quickly can I receive funding?
Once you have selected your desired funder, the application process will usually involve some suitability checks, discussing and defining your business – such as its product offering and industry of operation –and its funding requirements to find the most suitable invoice finance product. If suitable, the next steps will involve drawing up the offer – after this is agreed, the facility can be put in place and commence.
The arranged funding can be received potentially as quickly as 24 hours to around a fortnight depending on how smoothly the process goes. The turnaround time will depend on the nature of your facility chosen (e.g. whole turnover vs selective or single invoice finance) due to some differences in the verification required as well as subsequent processing.
Using Touch Financial can help you make the process of securing your desired advance even easier. Once you’re in contact with one of our expert consultants, they’ll usually match your company’s requirements with 2-3 suitable candidates from our approved panel of over 30 reputable funders. Our recommendation service is free and can save you time as we know everything which is required, streamlining the facility turnaround whilst at the same time giving you multiple options in just one phone call.
3. How will having a client relationship manager help?
Should you ever have questions about your invoice finance facility once it has been set up, many funders employ a client relationship or client services manager who can serve as your first port of call to ensure that your facility arrangement runs as smoothly as possible.
If your facility involves a client services aspect, you can expect to benefit from:
- Industry expertise so that the most suitable facilities are presented to you
- Thorough consideration into how the facility can be used to boost your business
- Added knowledge and understanding of any requirements and potential risks such as regulation changes.
4. Can an invoice finance financier provide bad debt protection?
Yes, many funders can provide bad debt protection (BDP) in line with your facility in case of unsettled invoices. BDP compliments invoice finance facilities and can be included with no extra administrative burden.
Key points to bear in mind when considering BDP include:
- Some bad debt protection ‘add-ons’ have special promotions attached to them, such as signing on for BDP before a certain date to receive BDP free for a certain period of time (e.g. the first 6 months free)
- Protection can be applied to your whole sales ledger or a selection of invoices / customers
- Do your debtors reside in the UK? Some BDP agreements can cover both UK and export customers
- Bad Debt Protection can be provided for both Factoring and Invoice Discounting facilities
- Bad Debt Protection is usually packaged within non-recourse and recourse products, the difference being whether the financier fully absorbs the unsettled invoices or not
If you are thinking of including Bad Debt Protection, evaluate the quality of your sales ledger debtors and the level of protection you think will suit your requirements.
Touch Financial’s consultants have vast experience with each of the financiers on our panel, they can help you find a lender that can offer the most suitable invoice finance package for your business.
5. Touch Financial helped me select my funder, now I want to change funders. What happens next?
If you already have successfully been introduced to a funder through Touch Financial, our aftercare service consultants will ensure that any problems you experience are dealt with and act as a sounding board to the funder’s client relationship manager should you have any questions about the operation of your facility or funder relationship.
In the event that you are thinking of changing your funder, know that your best interests will be considered, even more so if both the outgoing and incoming funders are ABFA members – obligated by the Inter Member Transfer Process (IMTP) to make the funding provider switch a smooth process. Different funders can carry different requirements for businesses changing providers – such as notice periods – but the IMTP aims to minimise the hassle involved.
To ensure that you are on the right track in finding the most suitable facility for your business first time around, though, Touch Financial’s invoice finance calculator can give you a useful indication of the fees and advance you can expect for your business. Furthermore if it’s a factoring solution which you’re specifically looking for right now, then our dedicated infographic can help you identify what you need to consider in order to select a salient facility.
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We hope you’ve found this invoice finance guide helpful; if you still have additional queries, get in touch today and one of our expert team can assist you.