Invoice finance is increasing in popularity, meaning there’s more competition than ever. Invoice discounting is a sub-form of invoice finance that allows you to access cash tied up in unpaid invoices immediately, mitigating the damage of late payment and non-paying clients (if agreed on non-recourse). It is a useful source of funding for businesses who can’t afford to grow or develop when clients are slow to pay their invoices, or for companies that have seasonal fluctuations in cash flow.
Selecting a Facility & Provider – Negotiate, Negotiate…
When it comes to getting a good deal, there’s always room for negotiation, particularly on a discounting facility. There are hundreds of lending companies on the market competing for your business. Even if you don’t fulfil all the eligibility factors considered above, it’s worth reaching out to multiple companies. Not all lenders were born equal, and some will find your business a lower risk than others. Engaging with your potential lenders and pitching your business to them can go a long way in procuring a better deal. If you can convince your lender that your industry, company and customers are low risk, you’ll pay less.
Some lenders will agree to reduce their fees once you have sold them a certain number of invoices, once they can see that you’re credible, and your customers are trustworthy. It’s worth seeking professional advice on securing an asset-based lending contract, to find out what conditions and rates would best suit your business. Take the time to fully research your options before you settle on a lender.
Recourse Matters
However, the fees for an agreement without recourse reflect this higher risk for the lender. Finance providers typically charge considerably higher fees and offer a smaller advance in these arrangements, which can be challenging for companies that require immediate access to significant amounts of cash. Additionally, you must carefully check the terms and conditions that come with a non-recourse agreement. In the case of some invoice disputes, the lender won’t assume liability for the debt, even with a non-recourse arrangement in place.
Choosing between non-recourse and recourse invoice discounting is tricky. There are a number of factors to consider, such as the potential savings for the company long-term, weighed against the damage of being liable for a single or multiple unpaid invoice.
Invoice Discounting Providers
If you’ve decided that invoice discounting is right for you, it’s time to find a provider. More and more companies are offering invoice finance as part of their financial services. Below you can find a brief overview of some of the lenders providing invoice discounting services.
Aldermore
Aldermore offer up to 90% of the invoice value as an advance. They have a high approval rate, approving 9 out of 10 applications they receive, making them an attractive option for businesses who have previously had finance applications rejected. However, they do require a higher turnover, typically only accepting clients with a turnover of £250,000 or more. The firm has been running since 2009 and in 2015 received the award for Invoice Finance Provider of the Year. You can make an application over the phone.
Barclays Invoice Financing
Barclays offer an advance rate of up to 90%. They stipulate a minimum turnover of £100,000 for selective invoice discounting and £500,000 for invoice discounting to cover a company’s entire sales ledger. Applications are to be made over the phone. While Barclays has the added advantage of being one of the biggest banks in the UK, be sure to secure a deal that suits your needs.
Bibby Financial Services
Bibby have not disclosed the minimum client turnover they accept but are known to approve applications from clients with modest turnover. They accept applications both online and over the phone. Bibby has a client satisfaction rate of 93% and received the 2017 award for Best Factor and Invoice Discounter at the National Association of Commercial Finance Broker Awards. Bibby is unique in its offer of up to 100% advance for invoices.
Hitachi Capital UK
Hitachi accept applications from smaller companies, setting their minimum client turnover at £50,000. However, to be eligible for confidential invoice discounting, you will need a minimum turnover of £250,000. They will provide you with an online quote before following up with a telephone application. Hitachi Capital also performed well in 2019, winning the Business Moneyfacts Award for Best Factoring & Invoice Discounting Provider in that year. They offer competitive customer service and up to 90% of the invoice amount within 24 hours.
HSBC
HSBC is another global bank, offering huge amounts of credibility. Their services are only available to large companies with a turnover of over £500,000, although this amount is based on projected turnover, which may mean businesses with high growth potential are still eligible to apply. Their products are available even to non-HSBC customers, and they typically offer a high level of customer service.
MarketFinance
MarketFinance offer an advance rate of up to 90% of the value of an invoice, offering invoice discounting as both a contracted service as well as pay-as-you-go and selective invoice discounting. They request a minimum client turnover of approximately £100,000 and charge fees of 1-3% of the invoice value.
MarketInvoice have a credible trade history, having partnered with huge financial service providers such as PwC and KPMG. They are also one of the more efficient lenders – their application process takes a matter of minutes online, and they typically provide an advance within 24 hours. Their service is supported by excellent customer service, which is rated more highly than most of their competitors.
RBS Invoice Finance
RBS offer up to 90% advance on invoices. They also reserve invoice finance for larger companies, stipulating a minimum turnover of £250,000. RBS boasts an accolade of awards in financial services, including the 2015 award for Best in Asset-Based Lending and Invoice Finance.
Ultimate Finance
This provider offers up to 95% of the value of invoices in advance. It’s a good option for smaller businesses, as they don’t specify a minimum client turnover. Their application process is slower than others, involving both an online enquiry and a meeting.
However, this face-to-face meeting fits into their customer-based approach, offering high-quality customer service. They have a team of dedicated relationship managers to handle your account and provide tailored support. Ultimate Finance won the award for Best Invoice Finance Provider in 2019.
