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Frequently asked questions
This section will help you dispel any common myths related to invoice funding:
1. Will my customers think my company has financial difficulties?
There are currently over 40,000 UK businesses using an invoice finance facility so you needn’t worry that people will think you are in difficulty. It is simply a tool to keep your cashflow healthy. Many lenders also provide a confidential facility which if you use this option, your customers will be unaware how you are funding your business.
2. Are these funding options expensive?
Compared to many other forms of business finance, this is definitely a competitive option. Various savings are made such as staff costs as your credit control becomes outsourced to the lender. As you are not waiting for invoices to be paid, your bank balance will also be improved and you may avoid expensive bank charges.
3. Is there a lot of paperwork to complete?
Obviously as with any financial agreement, there is always a certain degree of paperwork to be completed initially. However, once your facility is in place your administration time will be reduced as your credit control system will be managed by your lending team. Your sales ledger will be available online so you can see the daily position of your debtors.
4. How much cash will be released up front?
Every factoring facility is different from business to business so this will vary, although generally anything up to 85% of the invoice value will be released.
5. Do I only end up with this value of my invoices?
Absolutely not. An initial percentage agreed is released usually within 24 hours of your invoices being processed. The remaining percentage is held until your client pays in full – this is then released to you, less the lender’s monthly fee.
6. After issuing an invoice, how quickly can I access money?
This again varies from lender to lender. Typically funds are made available within 24 hours although some lenders are able to make same day payments.
7. Are my customers credit checked by the lender?
Most lenders will undertake their own credit checks, particularly if you have any one customer who receives the majority of your invoices. The lender may require you to take out credit insurance.
8. Does the lender offer any incentives to get paid by your customers?
As the lender has advanced you a higher proportion of the invoice vlaue prior to getting paid it is in their interest to receive the money as soon as possible from your customer. If you want to chase your own invoices, providing you have a strong credit control system in place, you may want to consider the invoice discounting option.
9. What happens if the invoice financer doesn’t get paid?
On certain occasions, your invoice may not get paid, sometimes due to a dispute or your client becoming insolvent. If this happens, the invoice may be reassigned back to you. Non payment can be protected by taking out bad debt insurance.
10. How quickly can I get a financing facility in place?
Generally it can be set up in approximately 7 days; However it depends on how promptly you can provide your lender with the necessary information they require in order to get credit approval.
11. What is the period of my contract with the lender?
Both short term and long term contracts are available. It is always advisable to test a lender’s service before committing to a long term contract.
12. What happens if the business fails?
Most financial providers ask for a personal guarantee. This is common practice to show your commitment. However, if your business fails the factoring facility should be covered by the outstanding invoices and so the personal guarantee should not be called upon.
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"All About Savings have provided our business with a new invoice factoring system that has dramatically improved our cash-flow position and flexibility with our clients..."