England 13/05/2012 – Invoice finance is a niche form of finance many UK businesses are discovering for the first time
The world of invoice finance is for many people a mystery. Even large firms have never heard of this form of financing. However, as the recession deepens and the flow of money from traditional financial organisations dries up more firms are discovering invoice financing and factoring and are turning to it as a way to improve cash flow within their companies.
Invoice financing allows firms to borrow money secured against their invoices. Of course, with this kind of financing there are limits because the financial institutions offering this kind of service are taking a risk. If your client does not pay their invoice, there is a risk that the loan cannot be re-paid in full. For this reason, most invoice finance firms have restrictions on who they will lend to.
However, if a firm is well established and is profitable they can borrow money in this way. They usually need to have a turnover of several hundred thousand pounds and demonstrate a proper invoice control system to qualify.
If they do meet the criteria, it is possible to borrow up to 90% of the value of the invoice. The loan is very short-term and is normally due for repayment within 90 days, but because most firms are paid well within those time limits repaying the loan on time is not a problem.
Other alternatives to invoice finance
Even if a firm does not qualify for invoice financing the companies that offer this form of finance are often a good place to go to in the current economic climate for finance. They tend to take an innovative approach to finance and usually offer a range of other alternative ways to raise money.
XL Business Finance is a great example of this. Their core business is invoice finance, but they also offer stocking finance and equipment financing, which allows firms to potentially use their stock and equipment as assets to borrow against. XL is unique in offering twenty-two different alternative financing and loan products.
XL Business Finance
Eaton Place Business Centre,
114 Wash way Road, Sale,
Zip: M33 7RF
Tel: 0161 980 0577
Fax: 0161 332 6148