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Invoice Finance

When You Should Compare The Market For Invoice Finance Deals | Invoice Finance Reading | Help with Invoice Finance
Why you should ‘compare the market’ for invoice finance deals as you would your energy or car insurance 800 533 Invoice Finance Connect

Why you should ‘compare the market’ for invoice finance deals as you would your energy or car insurance

Money experts are always advising us to consider switching insurance, mobile phone, broadband and energy providers to be sure of getting the very best deal possible for our circumstances.

But if your business is one of the circa 50,000 in the UK using invoice finance, it may not have occurred to you that the same principle applies to your existing funding deal, especially if yours has been in place for a long time.

Take the example of a company which, 10 years ago, made use of an invoice finance facility on an annual turnover of £1m and were borrowing around £150,000. The cumulative annual fees were in the region of £15k per annum.

Ten years on and the company’s annual turnover has grown to £8m, and its approximate borrowing is £1.2m.  Based on the original fee parameters set, the business would now be paying £135k per annum, an increase of £120k! If the business hasn’t reassessed or reviewed the finance arrangement it originally had in place, the fee rate they’re now getting may still well be in line with the deal originally offered, but, given the higher numbers involved, it could certainly be improved.

Another point to bear in mind, looking at our example, is that, 10 years ago, our company would not have been able to provide a proven track record of trading, and probably wouldn’t have had a strong balance sheet. So the invoice finance provider would have insisted on personal guarantees from the business’s owners. However, a decade later with a trading track record to show, a period of sustained profitability and a lower risk profile, such guarantees would no longer be necessary.

Other potential benefits of reviewing your facility

Of course, once your finance is in place, it can be tempting simply to leave things as they are. But, actually, there are many sound reasons for regularly reviewing your provider:

  • To make sure you’re not paying too much for your finance
  • To ensure that you are benefitting from the maximum available cash possible, especially if you need more borrowing to drive growth
  • To be sure you are getting the best possible service from your lender, especially if you’ve been experiencing issues
  • Your business may have simply outgrown your current provider, or changed direction in a way it can no longer support

If you think any of these applies to your own organisation, it could well be time to join forces with a new invoice finance partner.

How we can help

At Invoice Finance Connect, we have many years’ experience in this specialist area of business funding. We work by regularly reviewing the fees and security our clients have in place. If you don’t have a broker like us involved in your arrangements, it’s highly unlikely that your existing lender will ever come back to you and offer to review your current deal and reduce what you’re paying.

Talk to us whether you are new to the concept of invoice finance or have been using it for a while. We’ll make sure your business is connected to the lender that’s absolutely right for you now. What’s more, we’ll keep reviewing things to make sure that remains the case, and suggest changes when appropriate.

Get in touch with us today to talk through how we can help you.

Building for the future | Impact of Covid 19 on Construction Sector Finances | Invoice Finance Connect
Building for the future? Impact of Covid 19 on construction sector finances 800 533 Invoice Finance Connect

Building for the future? Impact of Covid 19 on construction sector finances

The coronavirus pandemic is arguably having a greater and more rapidly changing impact on the construction sector than most, with many projects halted overnight at the start of ‘lockdown’. Even before the outbreak, the industry was already experiencing Brexit-related uncertainty, and last September it recorded the biggest drop in new projects since the financial crash a decade earlier.

The crisis is likely to have strong structural effects on construction’s supply chain, some of which may not be felt until later in the year; even when a business starts work again, often they won’t see any cash for up to 60 days.

Global consultancy Mace suggests construction firms could see a reduction in turnover of £29bn in this year’s second quarter. It adds:

“There is a possible time bomb for smaller businesses … from the third quarter of 2020. This will only be exacerbated by clients deciding to withhold or delay payments and the end of the government’s job retention scheme.”

Meanwhile, according to the Office for Budgetary Responsibility (OBR), output could be down 70% in the second quarter of 2020, hitting cashflow significantly for those without adequate cash reserves or strong balance sheets.

Equally, for production lines and manufacturing plants, operating is only financially viable above a certain volume, while many building products are the same as those used on domestic projects. With many households freezing work, demand for construction supplies could slip below the breakeven level.

Government support packages are in place, but the Construction Leadership Council (CLC) says just one in 10 building firms which had applied for this emergency finance following Covid-19 disruption had succeeded. Around a third had had their applications rejected, while the remainder were awaiting a decision.

The Institution of Civil Engineers (ICE) indicates that some four in 10 firms were applying for this help to meet short-term funding needs, suggesting a reluctance of other lenders to work with the industry.

Challenges the industry was already facing

Historically, the UK’s construction industry has not seen traditional lenders willing to provide finance, especially where a loan is not secured against an asset, although more specialised lenders now serve this market.

At the same time, projects’ high upfront labour and bulk materials costs can have significant cashflow implications, as do many building schemes’ long lead times. And, unfortunately, the sector is also known for delayed payments and billing terms which are stretched out as much as possible.

Construction industry finance: the background

The construction industry has many sub-sectors and lots of mutual interdependencies, with main contractors regularly managing (and paying for) dozens of sub-contracts, each of which is often worth £50,000 or less.

Especially in the public sector, the industry makes wide use of framework agreements, or umbrella arrangements in which an organisation agrees with one or more supplier (including contractors, sub-contractors  or consultants) on the terms for a long-term relationship during which the employer may award one or more contracts. So, it’s a strategic partnering relationship which, in practice, can range from a loose arrangement with preferred providers to something more formal.

External project financing can take the form of loans, shareholder funds, grants, venture capital, subsidies, donations, crowdfunding, and the like.

How we can help

Invoice Finance Connect works closely with the construction sector to help it overcome its challenges, and we understand the industry well. We’re keen to strengthen these relationships during the current crisis.

We work primarily with regional and local operators with turnovers of up to around £50m, matching them up with the best-suited lenders. Contact us to talk through your options.

Impact Covid-19 had on Business Finance | Help with Invoice Finance | Invoice Finance Berkshire
What Impact Has Covid-19 Had On Your Business Finances? 800 533 Invoice Finance Connect

What Impact Has Covid-19 Had On Your Business Finances?

When Boris Johnson announced unprecedented restrictions to daily activities on March 23, it brought the life of the nation to an abrupt halt. As well as being a national health crisis costing tens of thousands of lives, the pandemic is also an economic emergency.

A recent Oxford Economics report commissioned by chartered accountancy body ICAEW predicted that GDP could shrink by 14% in the second quarter of this year, the biggest such decline in almost a century. It forecast the UK’s deficit could reach £290bn or 14% of GDP in 2020, the largest since World War II and exceeding even the 2009-10 previous record of 10.2%.

However, it added that recovery should be swift given the unusual nature of the cause of the decline, and that the rise in unemployment could be a relatively modest one to 7% in the year’s final quarter, due to the government’s job-protection furlough scheme.

But, equally, recovery could be hampered by any extension of the lockdown, a second wave of the virus, the ending of government support too quickly, the collapse of the Brexit trade talks or if long-term economic damage turns out to be worse than feared.

In May, the Bank of England issued a bleak warning of a 30% GDP slump with the loss of 1.5m jobs and predicted that the economy would not bounce back until next year.

Winners and losers

Amid the hardship, inevitably some firms have survived (and thrived) better than others. Media streaming service Netflix has seen a surge in subscriber numbers, while fashion firm Boohoo increased its year-on-year sales in April thanks to high demand for smart tops for Zoom calls, alongside leisurewear. This despite footfall in British shops imploding by some 90% since the beginning of March.

At the same time, Laithwaite’s Wine increased its prosecco sales in April (up 117% year-on-year). Demand for smaller bottles was particularly high as people enjoyed a glass of fizz while chatting to friends and family online.

Anything related to home-based exercise and fitness has also proved popular, from apps and classes to clothes and equipment. The Tone & Sculpt app, for example, saw an 88% growth in downloads this spring. Similarly, those selling goods for home crafting and baking have done well.

Interestingly, online retail giant Amazon has said it could post its first losses in five years, its 28% rise in income offset by the costs of hiring 175,000 extra staff, overtime, PPE and disinfecting its warehouses.

Supermarkets have posted rises in sales, following initial panic buying and stockpiling, while Morrison’s has warned trading remains ‘highly volatile’.

Of the sectors struggling, education is one of the hardest hit, with a 90% reduction in output according to the Office for Budget Responsibility (OBR). Meanwhile, the hospitality, construction and manufacturing industries have all lost more than half their output.

Adapting to survive and thrive

Clearly, many companies have adapted, shifting business online, offering home deliveries and so on. One gluten-free café in Reading has been delivering kits for making donuts at home kits, as one example.

Meanwhile, the Bread Ahead bakery in London’s Borough Market, found new ways of keeping its three stores going. Live Instagram baking sessions led to 25,000 new followers in five days after restaurant orders halted, while online sales and collections from stores have increased.

Looking to the future

Clearly, reopening a business post-lockdown comes with its own costs and risks. Cashflow may be tricky for companies that have not been trading recently. Previous customers may not all return immediately, and health and safety measures may restrict footfall on your business premises.

There may be additional expenses like staff training, protective equipment or signage. Equally, business could be affected if you supply a sector such as the travel industry and there is limited demand for what you offer.

Rather than just picking up where you left off, you may need to combat a potentially lengthy period of uncertainty. That may mean what Accenture calls an ‘active reinvention’ of your brand, perhaps with more agile operations and variable cost structures.

Many will have to adapt to a new and changing situation at speed.

How we can help

Support for businesses is available from the government in various forms, including relief for income tax, VAT and business rates.

The government’s Job Retention Scheme, or furloughing, pays 80% of salary up to £2,500 monthly, provided staff do not work for the employer while furloughed. It began on April 20, and after two weeks nearly a quarter of UK workers had taken up the arrangement. It’s currently due to last until the end of October.

However, none of these schemes can last indefinitely. Once the furlough programme ends, employers will be able to bring back workers full or part-time, pay for them to be furloughed for longer or consider redundancies.

Once the various sources of finance are wound down, any loans or other bills need paying, and it may not be possible to do this immediately. Businesses need a cashflow plan in place now to improve cashflow once the government help stops.

At Invoice Finance Connect, we have more than two decades’ industry experience so are ideally placed to connect you with the best ongoing source of short-term and longer term funds for your business, whether that’s invoice finance, supply chain funding, asset finance, trade financing or anything else.

Contact us to discuss your specific issues and discover what support is available and how we can assist.

What Is Invoice Finance | Factoring | Invoice Discounting | Invoice Finance Advise in Berkshire | Invoice Finance Connect
What Is Invoice Finance? 800 533 Invoice Finance Connect

What Is Invoice Finance?

No matter what type of business you own or work in, there will always be companies striving to outperform you or trying to offer a more competitive edge, enticing your clients to switch suppliers. Having a competitive edge really is a necessity, especially today in an ever-changing business landscape.

Often a business is asked to operate by selling their products or their services to a customer on credit terms, where payment will be in 30, 60 and occasionally 90 days after product shipment or project completion. Whilst this is an ideal solution for your clients, it can often be detrimental to the business, having a huge impact on cashflow and having the ability to meet day-to-day costs. This is where the benefits of invoice finance really come into their own. In essence it provides you with the necessary cash that you need in your business as soon as you issue your invoices.

Key facts about invoice finance:

  • In the main Invoice finance is delivered through 2 products. The first is Factoring which is a disclosed service with the customer base being fully aware of the service. The second is Invoice Discounting, which is predominantly a confidential facility without the customer base being aware.
  • In essence, with Factoring, the Invoice Financier looks after a company’s unpaid invoices, whereas with Invoice Discounting the responsibility of the sales ledger management is retained by the business.
  • You get immediate access to cash as soon as an invoice is raised.
  • When a customer pays your invoice, you will receive the balance of the face value of the invoice, minus the lender’s fee.

Key advantages of using invoice finance are:

  • You can improve your cashflow and working capital without having to wait for your customers to pay your invoices promptly.
  • Immediate access to funds means you can run your business by paying suppliers on time, fulfilling payroll obligations, purchasing new equipment or facilitating further expansion.
  • There is no need to offer property assets as a form of security.
  • Packages can be tailored to individual business needs.
  • Often an approval process is relatively painless and quick, on occasion they can be approved within 48-hours.

Typical examples of where invoice finance is required are:

  • Recruitment companies providing temporary staff. Often employees are contracted on a weekly basis, so wages need to be paid every 7-days. However often a client agreement states payment terms of 30 days + so an Invoice Finance facility would accommodate this type of cashflow cycle.
  • Food and drink manufacturers who supply some of the leading chains of Supermarkets have to pay their suppliers on 30-60- day terms, whilst waiting up to 90-days for payment from their customers.
  • Young businesses who are going through a quick and unexpected growth period due to business success will often feel the pinch. Cashflow needs increase quickly to accommodate for the business expansion and invoice finance is often key to maintain and healthy and stable platform for success.

We regularly get asked by businesses already using invoice finance if we can assist them, this may be due to issues with their current provider or indeed that their funding has been restricted. Here at Invoice Finance Connect, we are always happy to offer impartial and independent advice to ascertain if we can assist you.

If you have a question or need some help in relation to Invoice Finance, then our team will be delighted to help. For a free consultation please call us on 01635 283089.

Restrictions Within Invoice Finance Facilities 800 533 Invoice Finance Connect

Restrictions Within Invoice Finance Facilities

When we are approached by a business that is already using Invoice Finance, it is usually due to the fact that the facility is being restricted by their existing lender. Not only does this hinder the cashflow requirements for the company but it can affect the growth aspirations.

These restrictions are typically as follows:

  • Overall Facility limit
  • A concentration or funding limit against a specific customer
  • The overall advance limit is too low or has been reduced
  • Level of overseas debt that the existing lender is prepared to fund

If any of the issues highlighted above feature on your Invoice Finance facility and they cannot be resolved then you need to seriously consider moving to a new lender.

There are so many different providers of Invoice Finance and each lender has their own unique credit policy or approach to how they do business. What might be an issue for 1 lender and is reason for a restriction to be placed, might not be for another.

Invoice Finance Connect was approached by a recruitment business during the early part of 2017, who were being restricted on their overall facility limit. The lender at the time would not increase the facility limit as the financial performance had declined in the previous year compared to prior years.

There was however a reason for this, which could all be explained along with producing forecasts, which showed that the business would bounce back well during the current year. Unfortunately, the existing lender would not change their stance and would not increase the overall funding limit. Consequently, Invoice Finance Connect introduced them to a new lender who understood what had happened historically and demonstrated the faith in the management team by giving them the facility limit that they needed, which met the cashflow requirements of the business moving forward.

This business has been with their new lender for nearly a year now and both parties are extremely happy and the business has gone from strength to strength.

If any of the issues highlighted are a feature of your current facility then please do get in touch with us. They can have a huge impact on cashflow and of course we use our knowledge and experience to help you find a lender who will work with you to ensure you are getting the full benefits from your facility.

Contact us for more information on 01635 283089 or email us at info@invoicefinanceconnect.co.uk.

Bad Debt Protection 800 533 Invoice Finance Connect

Bad Debt Protection

HAVE YOU THOUGHT ABOUT PROTECTING YOUR SALES LEDGER?

There will always be the odd occasion where a payment doesn’t arrive on time no matter how strong your credit control policies are. This can be due to a number of reasons which are out of your control.

Bad debt cover offers businesses protection from the risk of bad debts and in turn offers a business owner peace of mind if the unfortunate event arrives where a debtor fails to pay or goes in to liquidation.

There are many different credit insurance options available which can be tailored to your business’s needs. Maybe you need protection against your entire debtor book, single debtors or key customers who have bad credit history or they may have placed an order which carries a high value.

International cover is also an option for companies who trade with overseas customers.

Bad debt protection can be bolted on to an existing invoice finance facility and is a welcome addition as it provides the lender with additional comfort when they review their risk.

If you feel that debtor protection could help your business and would like more information, please contact us on 01635 283089 or email info@invoicefinanceconnect.co.uk to discuss your options.








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