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.