Emerge Stronger With Invoice Finance
John Wilde, Sales & Marketing Director of SME Invoice Finance,
discusses how you can power your business success with positive cash flow and immediate working capital.
A more certain future
With an invoice finance facility in place, you can look forward to a more certain future, knowing that a constant supply of cash is available in line with your sales. Invoice finance unlocks a high proportion of cash tied up in your sales ledger within 24 hours, giving you the freedom and confidence to concentrate on new business opportunities, without the worry of how to finance that next order.
It is also worth bearing in mind that an overdraft can be ‘called in’ at short notice, leaving your business vulnerable from the start, particularly in this economic climate. No wonder invoice finance is widely regarded as the most effective way to finance a new start business.
Linked to sales
As an invoice finance facility is linked to your sales ledger, funds grow automatically as your sales increase, ensuring your business always has access to cash – whenever you need it. Instead of being a fixed ceiling facility, invoice finance has the flexibility to expand with your sales without needing to go ‘cap in hand’ to your bank to negotiate additional facilities.
Invoice finance:
- generates immediate working capital
- reduces the pressure on your cash flow
- links funding to sales, providing the freedom to grow without restrictions
- helps secure preferential early settlement discounts
Client Case Study
Stuart Smith started Peterborough Crane Hire with the purchase of a 25 tonne telescopic mobile crane, following a period working in the Middle East. From just one crane, the company now owns a fleet of 20 cranes ranging from 12 tonnes to 300 tonnes.
Stuart Smith says: “These are difficult economic times, we all know that. One thing I do know for certain is that without an invoice finance facility, this business simply could not exist. I used to have an overdraft facility many years ago but that would not have been able to provide sufficient funds for the expansion of the business. In harder times, such as now, invoice finance comes into its own with the immediate provision of funds, together with an efficient credit management and collections service.”
Invoice finance has enabled the company to increase its working capital significantly by converting trade debtors – sales invoices – into cash. By unlocking the cash tied up in the sales ledger, the crane hire business has been able to finance growth, as well as help fund vital investment in new plant.
In the past, companies seeking additional working capital have had to settle for the rigid ‘rule book’ approach of the traditional banks. Constraints that can limit growth and arrest business development. Invoice finance, on the other hand, offers greater flexibility.
“Invoice finance gives us an immediate injection of cash and the level of finance available to us has expanded at the same rate of growth as our business, without the need for continual re-negotiation. Now, times are more difficult but invoice finance still delivers substantially higher levels of funding than an overdraft.”
“From a service and relationship perspective, I regard the people at SME Invoice Finance as colleagues. We have a mutual trust that is at the core of our relationship,” adds Mr. Smith.
Jargon Buster
The invoice finance industry is a jargon jungle. But don’t let that put you off. Here is a quick guide to some of the most popular terms.
Advance rate. The agreed percentage of eligible debts, which will be made available for you to draw down.
Cash Flow. The measurement of cash that your company gains or loses during an accounting period; perhaps one of your most important management tools.
Confidential Invoice Discounting. An invoice finance facility where funds are advanced to a business by a lender (discounter) secured against the value of the business sales ledger and where the funding relationship is confidential (i.e. not disclosed to your customers) with complete responsibility and control of the sales ledger management, credit control and collection functions remaining within the business.
Factoring. A method of providing accelerated cash flow to a business using the sales ledger (receivables) as security to borrow money and where the lender also provides a full sales ledger management, credit control and collections service.
Working Capital. Current assets less current liabilities, representing the investment required to finance stock, debtors, and work in progress.
The new SME Invoice Finance web site has been developed as a helpful reference source for company directors, containing valuable information on all aspects of invoice finance, featuring a downloadable guide, case studies and a series of practical ‘how to’ tips to help new start businesses emerge stronger from the recession. You can now view all of this information and more at www.smeif.com.
Contact:
SME Invoice Finance Limited
Chertsey House
56-58 Chertsey Street Guildford GU1 4HL
T: 01483 531100 F: 01483 300959 E: mail@smeif.com
W: www.smeif.com