Today’s guest piece is written by John Dodsworth, Director at Open Invoice Finance
Invoice Finance loves recruitment companies and recruitment companies love the funding from Invoice Finance lenders.
It’s easy to see why. Invoice Finance likes “clean” and collectable invoices. The provision of a signed timesheet from a customer validating the invoice is great evidence to support the fact that the invoice will get paid. Equally, the funding allows recruitment companies to pay its contractors and PAYE ahead of waiting for customers to pay their invoices, taking the headache and stress away of short payment terms on overheads verses the time it takes to get paid.
So, it’s simple then. Get yourself some Invoice Finance and all your ambitions will be fuelled? Perhaps there are a few things to consider before jumping in with the first offer on the table?
What are my options?
With over 40 lenders operating in the Invoice Finance market – it can be a bit of a minefield. Whilst in the main they broadly offer the same, the nuances and terms between lenders can add up to being distinctly different offerings.
Understanding and being clear about your needs and effectively communicating this to any lender will be key to getting the offer you seek. Without this I guess it would be like a candidate applying for a job but not knowing which one they want, why and if their suited to it. It’s never going to be a great outcome for either party.
So, think about what it is that’s important to you. Price and Product will always come in to it (and the market is very competitive again), that’s a given. Do you want to outsource your credit control? Do you want to protect your debtor book against customer insolvency? Is relationship important to you, would you prefer a local office or do you simply want a light touch approach? Would you like a payroll provision as well? Do you do permanent placements and would you like these funded too? How do you feel about personal guarantees?
These, and other considerations are key to seeking the right partner for you.
What should I look for?
When either obtaining Invoice Finance or renewing the facility with your existing provider there are a few things to think about before signing on the dotted line.
Does it match what was asked for? How clear are the costs and is there an additional tariff of fees that you need to be aware of? What is the likely annualised cost of the facility and does this represent good value for money? Does the funding serve you now and for the short to medium term future? Are there any restrictions or excluded accounts that will affect funding levels?
Ultimately, you will want to ensure you have got the best available facility for your business. Like placing the best possible candidate, there are, at times, compromises to be made, but you are unique and so should your funding facility be.
Is it worth looking around?
For those that are new to Invoice Finance, the temptation is to simply talk to your bank and sign up with their Invoice Finance business. This may or may not be the right solution for you depending on your specific needs that you have set out. Perhaps there are some compromises that you don’t really want to live with.
Equally, when it comes to renewing your existing facility, the easy option is to re-sign with your existing provider. Again this may or may or may not be the right thing for your business. Perhaps there are some restrictions or there have been some fractious moments in the relationship or that personal guarantee is still in place and you would like it removed. Or you may simply want to get a better deal on funding and price.
Without doubt the market is competitive and shopping around will keep your eye in and at the very least ensure you still have a competitive facility from your existing provider.
Why bother using a broker?
Using a reputable broker, like Open InVoice Finance, will gain you access to their knowledge and contacts. You can Google these things and do it yourself, but you could waste a lot of time and effort when you don’t need to meeting with multiple lenders seeking similar information. Use the broker’s expertise to facilitate negotiations on your behalf with lenders, to get you the offer you seek, saving you the time and hassle of doing it yourself.
Picking the right broker is key. Do they specialise in Invoice Finance? What experience do they have in the sector? Have they been recommended? Do you get the sense that they understand you and your business? Do you like and trust them?
Invoice Finance and Recruitment have a long lasting and positive relationship. All relationships need assessing from time to time, that’s a healthy thing. Open InVoice Finance can offer you impartial (non-pressurised) advice to sense check with you that your needs are being met and seek a better alternative partner where appropriate.
Should you wish to find out more, discuss seeking a competitive offer or have any specific questions, please do feel free to contact us.
T: 020 3701 3806
M: 07881 308818