Invoice Finance
Tees Valley Finance can access a full range of invoice discounting and factoring options for your business. Recent research has highlighted that only 3% of SME's use invoice finance as a source of funding when starting up their own business - 50% use personal assets and 38% use bank loans.* In the USA, 80% of companies rely on invoice finance.
Invoice finance can provide your business with an immediate cash injection, enabling your business to increase production and continue to develop.
Invoice finance can be split into two areas:
Factoring
A factor (agent) will purchase outstanding invoices, providing you with the money to reduce your debts or to reinvest in your business. The factor will advance you up to 90% of the outstanding ledger immediately. They will then invoice your customers directly and once they have recovered 100% of the debt, they will forward the remaining 10% minus their commission. Commission rates vary dependant on turnover and number of invoices, but it is generally between 0.5% - 3% of the total outstanding debt.The factor will also charge an annual fee in the region of 1% of your total annual turnover The factor will chase the debt on your behalf. Some factors will provide this confidentially so your customers are not aware that another company is managing your debts. Some factors will pass any bad debts back to you. (Recourse factoring)
Factoring enables your business to generate cash immediately (some funds can be released within 24 hours). The factor will focus on your sales ledger, freeing up your time to concentrate on your business. This may also be cost efficient, meaning your business does not have to employ staff to chase invoices.
Some factoring companies will accept business with a minimum turnover of £50k per year and only one years trading history.
Invoice Discounting
This is very similar to factoring, but you maintain control of the sales ledger debt. Invoice discounting is therefore a confidential service.
This service is useful for businesses that are large enough to employ staff, or who have the information systems in place, to collect invoices.
This is an option to consider for businesses with a turnover greater than £250k per year. However, we can arrange invoice discounting for virtually any business regardless of turnover levels or length of trading.
*Evening Gazette 13/09/05