With over 10 years of experience across leading business finance organisations, I’ve gained a deep understanding of how these solutions work in practice. As a business owner who has personally used invoice finance and a broker who has arranged 100s of facilities, I’ve seen first-hand what makes a facility work – and what doesn’t.
Invoice finance is a powerful tool for improving cash flow, especially for businesses that deal with long payment terms. However, with a wide variety of providers and products available, knowing how to choose the right option for your business is essential. Below are five key tips to help you navigate the invoice finance market effectively.
1. Match the provider to your business needs
Invoice finance isn’t a one-size-fits-all solution. There are over 50 providers in the UK, and each has its strengths and areas of expertise. Some providers are excellent for industries like recruitment, while others are better suited for businesses with high customer concentration or specific cash flow challenges. It’s important to understand which provider aligns with your circumstances. The right match can make all the difference in ensuring the facility works smoothly for your business.
2. Understand the different types of invoice finance
Providers offer various forms of invoice finance, often branded with different names. The two main options are invoice discounting and invoice factoring. Invoice discounting allows you to manage your own credit control while gaining fast access to funds. Factoring, on the other hand, includes credit control as part of the service, with the provider handling client payments on your behalf. Consider your preferences, your team’s capacity, and what your business qualifies for when deciding which product is the best fit.
3. Read the fine print carefully
Headline rates might grab your attention, but they don’t tell the full story. Hidden charges, covenants, or restrictions can have a significant impact on your business. For example, the cheapest option may come with conditions that don’t align with your operations, potentially costing you more in the long run. Always review the terms and fees in detail, and if possible, consult a specialist to ensure you’re making the right choice.
4. Review your facility regularly
The invoice finance market is highly competitive, and terms, rates, and services are constantly evolving. Reviewing your facility every 12 months can help ensure you’re still receiving the best possible service for your needs. You might find a provider offering better pricing, more flexibility, or enhanced service levels that better suit your business as it grows and changes.
5. MOST IMPORTANTLY: Focus on long-term relationships, not just sales pitches
It’s easy to be impressed by a charismatic salesperson, but their involvement typically ends after you sign the contract. The more important relationship is with your account manager or the risk team who will handle your facility on a day-to-day basis. When evaluating a provider, ask to meet the relationship manager early in the process.
Understanding how they work and their approach to client care can give you greater confidence in the long-term success of your invoice finance arrangement.
Is invoice finance right for your business?
Invoice finance can be a transformative funding solution for businesses looking to improve cash flow, manage growth, or bridge gaps caused by late payments. By following these tips and carefully evaluating your options, you can choose a facility that supports your business goals effectively.
Take the time to explore the market, ask questions, and find a provider that’s the right fit for your needs.