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The Financial Conduct Authority (FCA) announced on 11 January 2024 that a review will be conducted

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Supporting Your Business Growth With Invoice Finance

23rd April 2024

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For businesses in a wide range of sectors, invoice financing is a valuable – and often under-utilised – method of commercial finance that can support more consistent cash flow and growth.

In the current economy, with budgets becoming tighter, every penny counts. If your business works extensively with suppliers, stockists or partners, invoicing is likely to constitute a significant portion of your incomings and outgoings.

Studies suggest that almost 90% of businesses report their invoices are paid after the agreed-upon due date. Anglo Scottish’s invoice financing can be used to help protect your business’s consistent cash flow and get access to the funding from your unpaid invoices.

What is invoice finance?

Invoice financing allows your business to access up to 90% of the value of your unpaid invoices. Businesses in sectors such as construction, manufacturing, haulage and more are increasingly reliant on the payment of invoices to manage their cash flow, pay overhead costs and more.

As such, invoice financing is a useful facility, allowing your company to get access to the money you’re owed. It can be particularly helpful for SMEs and companies that deal with seasonal payment cycles.

Is invoice finance right for your business?

Invoice financing has a number of key benefits, making it a lucrative facility for certain businesses. The irregular cash flow your business will experience as a result of waiting on invoice payments can cause difficulty in managing your operations. Steady cash flow makes budgeting and forecasting simple, insulating your company in the event of unforeseen costs.

Invoice financing can therefore establish some more normalcy, reducing your reliance on timely payments from suppliers. It carries several benefits, such as:

Speed

Invoice financing provides the ability to get access to your money far quicker than other forms of financing.

Flexibility

Invoice financing can be ongoing each month, or used as a one-off to help bridge cash flow gaps.

Cost-effectiveness

Costs of invoice financing are based on a small percentage of the invoice value.

Growth potential

Invoice financing provides capital which can be used to grow and expand the business.

Consistency

Invoice financing can negate the peaks and troughs of industry-specific seasonal payment cycles.

Equally, there are also a number of features of invoice financing that your business should be aware of. Businesses can easily become over-dependent on invoice financing.

Under certain invoice financing agreements, your business will have reduced control over collecting payments from your customers. As such, you should consider how important your relationships with your customers, suppliers or other invoicing bodies are.

Invoice financing may also be risky if your business has a poor credit history – however, our team will work with you to establish the perfect arrangement for you.

Types of invoice finance

Invoice financing covers a range of different agreements – it’s important to choose a solution that suits your business’ specific needs.

Invoice factoring

Invoice factoring is one form of an invoice financing agreement, which can be particularly helpful if your business has a high volume of outstanding invoices.

Under an invoice factoring agreement, the factor – one of Anglo Scottish’s approved partners – will purchase your invoices directly from your business and assume responsibility for collecting payment from your customers. This means the factor will own the debt and take on the risk of non-payment.

Factoring is cheaper and easier than a bank loan, and can reduce your business overheads. However, it may only be suitable at certain times.

As your customers will be directly dealing with the factor to pay their invoices, this arrangement must be disclosed to your customers. If you have a small, consistent number of customers, this may not be the best course of action – the personal touch you presently offer might be of value to them, as some customers prefer to deal with the invoice directly than operating with a third-party invoice factor.

If you have a high number of customers, however, and your personal relationships with them are limited, invoice factoring can be particularly useful in limiting the amount of time you spend chasing unpaid invoices and reducing cash flow issues.

Invoice discounting

Invoice discounting is a different form of invoice financing, under which your business retains ownership of the invoice and continues to manage and collect payment.

Under this agreement, the financier – one of our approved partners – will provide funding, using the invoices as collateral. Invoice discounting carries many of the same benefits of invoice factoring, such as improved cash flow and access to capital, while maintaining control over your invoice payment collection.

Invoice discounting agreements rarely need to be disclosed to your customer, as nothing will change in terms of your mutual arrangement. If you have close relationships with a small number of customers, invoice discounting could be a good facility to make use of.

However, if you’re looking to reduce the time spent chasing unpaid invoices, then invoice factoring may be a more suitable option. Because invoice discounting means you still own the invoices, you will remain responsible for collection.

Eligibility for invoice finance

Eligibility for invoice financing will depend on your business’ specific circumstances as well as the criteria set by our individual partners.

Thanks to the size and variety of our funding panel, we can offer access to a wide range of lending terms and criteria, meaning we can typically find the perfect arrangement for businesses with various requirements.

Eligibility criteria may vary, but typically include:

  • Your business’s credit history
  • your customer’s credit history
  • your business’ size
  • your invoice volume

At the application stage, we’ll work with you to establish your ideal lending terms as well as the information you’ll need to provide, to ensure the process is quick and easy.

How to apply for invoice finance

Applying for invoice finance is simpler than ever with Anglo Scottish. Just get in touch with our expert team today to discuss your requirements – we’ll work with you to advise on the best-suited form of invoice finance for your requirements and connect you with the perfect partner to deliver that finance.

To get in touch, give us a call on 0191 410 4776, email us at enquiries@angloscottishfinance.co.uk or contact our team today.

FAQs

What businesses is invoice finance for?

Invoice finance can be utilised by a vast range of businesses, but is most-suited for businesses with volatile or inconsistent cash flows as a result of invoicing. Different sectors may be more reliant on invoice financing than others.

SMEs can also benefit from invoice finance, as these businesses are less likely to have the liquidity of larger, more established businesses, and may therefore struggle with cash flow issues.

Can invoice finance help with business growth?

Yes, invoice finance is a valuable facility to support your business growth. Getting quicker access to funding that’s already owed to you can support investment in growth where required, and help improve efficiency going forward.

Contact the NFU Scotland Finance team

Tel: 0191 814 3311

Email: NFUScotlandfinance@angloscottishfinance.co.uk


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