Invoices Are The Key To Financial Success

    BRIGHTON, ENGLAND, June 09, 2009 /24-7PressRelease/ -- Put simply, invoice finance allows a business to immediately access the value of its unpaid invoices, and can make the difference between a business that survives and one that thrives.

Thanks to the greater flexibility offered to the client by this form of funding - and the positive impact delivered to ongoing working capital reserves - invoice finance has experienced massive growth in popularity over the past decade.

Bank overdraft lending to small and medium sized enterprises (SME) - defined as a company with an annual turnover of up to GBP1m - was at GBP19.8bn in 1992, and has declined by more than half since then. During the same period, invoice finance has exploded (Source: British Banking Association).
There are two basic types of invoice finance:
Factoring - Funds are advanced when an invoice is raised and the factor collects payment on behalf of the business
Invoice Discounting - Funds are advanced when an invoice is raised but the business retains control of collecting payment from their customers
Both are available with protection against bad debt.

So, which option is most appropriate?

Factoring
Factoring is particularly suited to owner-managed business, partnerships and limited companies that sell goods to other businesses. It helps to maintain a healthy sales ledger and minimises problems caused by late payment. By providing working capital between invoice and payment, Factoring ensures the business is able to pay suppliers promptly, negotiate discounts, and ultimately aids business growth without the need to negotiate additional funding limits. The Factoring team becomes an extension of the company's accounting department, taking over responsibility for collecting invoice payments and the important associated administration of running the sales ledger.

For many businesses Factoring is the right solution because improving cashflow ensures accurate forecasting. By receiving up to 90 per cent of the value of each invoice as soon as it is raised - as can be offered by some independent invoice financiers - Factoring allows management to focus on growing sales rather than collecting debt.

Invoice Discounting
Invoice Discounting is very similar to Factoring in that the financier advances an agreed proportion of the invoice value as soon as the invoice is raised. The main difference is that the business is responsible for collecting payment from customers rather than outsourcing this function to the financier. Invoice Discounting can even be delivered on a confidential basis, so that customers need not know that the facility is even in place.

For some companies this is a better option than Factoring because it allows the business to maintain the credit control function and retain customer relationships. Invoice Discounting is better suited to businesses with an annual turnover of more than GBP500k but, just like Factoring, it is quick and easy to set up and flexible enough to grow with the organisation.

In essence invoice finance presents a simple and effective way to improve the cashflow situation of any business. Whether a company chooses Factoring or Invoice Discounting, it is often the case that they will receive more money than traditional banks would provide. There is no need to re-negotiate terms or funding levels as the business' grows, businesses can use as much or as little as they choose, and the facility is tailored to the individual needs, unlike the traditional banking view of "one size fits all".

Additional Benefits
When using an invoice finance facility, there are various other services that can be 'bolted-on' by some of the bigger financiers to provide even greater financial protection, stability or an injection of funds.

Bad Debt Protection
Unpaid invoices can cause a real strain on a young, or expanding company - it can eat into profits and threaten financial security. Riding out teething problems all hinge on the understanding that invoices will be paid in good faith.

Bad Debt Protection is important for young companies or those with low cash reserves. It shelters a business against the possibility that a customer will fail to pay due to insolvency and protects profits.

Factoring with Bad Debt Protection provides value for money and peace of mind. With some providers 100 per cent cover can be provided on credit approved customers. Bad Debt Protection can payout against both insolvency of a customer, or if invoices remain outstanding at 120 days past due date. Payment against an approved bad debt can be made available in as little as five days.

Trade finance
When combined with Factoring or Invoice Discounting, Trade Finance supports businesses when importing goods from overseas suppliers. It bridges the funding gap by financing up to 100% of import purchases without impacting cashflow. It also reduces the risk associated with paying overseas suppliers and not receiving delivery on time or even at all.

Trade Finance ensures goods are only paid for once confirmation is received that they comply with agreed terms and are being delivered. Combining this service with invoice finance means the business effectively doesn't pay for the imported goods until the customer settles the invoice.

In simple terms, the importer asks the financier to raise a Letter of Credit, which contains all of the terms and conditions of the sale. This letter acts as a guarantee that the financier will release payment to the overseas supplier at the agreed time. Once that is complete, the importer distributes the goods and invoices to its own customers, when the invoice finance facility comes into operation to repay the Trade Finance advanced.

Trade Finance is particularly useful for companies without the means to pay for goods in advance or where suppliers request proof of ability to pay. It allows importing companies to maximise their growth potential and often, suppliers prioritise Trade Finance orders because financial certainly is given to both importers and exporters.

Enterprise Finance Guarantee (EFG)
The Enterprise Finance Guarantee (EFG) replaced and improved upon the successful Small Firms Loan Guarantee scheme and is a Government scheme administered through the Department for Business, Enterprise and Regulatory Reform's (BERR) - formerly known as DTI. This Government-backed business loan is designed to help established viable companies looking for additional funding or working capital and through Venture; businesses can raise anything from GBP25,000 to GBP1 million.

Combining the EFG with factoring or invoice discounting can provide a valuable lump sum alongside ongoing cashflow support, enabling businesses to take advantage of growth opportunities as they arise.

Choosing the right financier
As with choosing any business advisor, selecting the right financier is a big decision. It is vital to pick someone with the relevant expertise so they can truly understand the business and provide best practice advice.

Independent financiers are more likely to offer specialist facilities such as invoice finance, Trade Finance and even Asset Based Lending. Independent providers tend to be less bureaucratic and more flexible than traditional banks. Each financial solution is tailored to the individual business' needs, supporting their immediate financial needs and evolving as those requirements change in the future.

The difference between traditional banks and independent financiers today is the level of customer service. Clients of independents are 'named', rather than 'account numbers' and there is a greater focus on understanding the business and the firm's financial stability. Dedicated teams enjoy more personal relationships and ensure solutions best suit the business' requirements.

Kevin Weaver from Factoring UK commented, "Brokers often find themselves involved in time critical situations, where solutions are required speedily to secure a deal and to give clients confidence with continuity of funding. In these situations they are more likely to involve an independent financier who, with short lines of communication and often local underwriting, is able to respond very quickly."

For more information please visit www.venture-finance.co.uk.

Note to Editors:

About Venture Finance - www.venture-finance.co.uk

Venture Finance is a premier independent invoice and asset based financier, providing creative funding solutions for businesses from start-up to a turnover of GBP200 million.

Venture, a wholly owned subsidiary of ABN AMRO Bank N.V., is twice winner of Credit Today's Factor & Discounter of the Year award in 2005 and 2006

Core services are Factoring and Invoice Discounting, which use the value of outstanding invoices and other assets to release ongoing working capital back into a business. Venture handles over GBP3.5 billions in client invoices per year.

Venture also has one of the widest range of services in the independent sector, so is able to help companies looking to manage cashflow, fund business opportunities, purchase new machinery, merge with or acquire a new business or expand their operations.

Venture is the only financier to offer an online Factoring service, called Venture Factors Direct. This combines the benefits of a traditional invoice finance facility with the UK's fastest approval process and a saving of up to 43 per cent.

Venture Finance was the first independent financier authorised as a 'lender' of the Government's Small Firms Loan Guarantee Scheme by the Department of Trade and Industry (DTI) and has lent over GBP16m to clients through the scheme.

All press enquiries to:
Sarah Belizaire-Marron/Ben Crispin
Midnight Communications
Tel: 01273 666200
Email: [email protected]

# # #