Invoice finance – a valuable source of funding for SMEs

Whether you’re a start up or a well-established business, cash is king and managing its flow is crucial to your long-term success.  With traditional funders not lending as readily as previously experienced, businesses often need to use alternative methods to source working capital finance to fund start up and growth.

Invoice discounting and invoice factoring can provide a valuable source of funding for SMEs in helping to improve their cash flow. Both products release up to 80% of the value of the invoices outstanding, in advance, to your client. The funder takes a small fee (typically around 1% of the invoice value) and charges interest while the invoices remain unpaid. Once the invoices are paid, they return the balance of around 19% back to the client.

The security taken is predominantly a charge over the book debts (the debtors), enabling you or your client to use other funding tools alongside the facility. There is also a debenture lodged, but this can rank behind other existing forms of borrowing.

Both factoring and invoice discounting allow for fluctuations in turnover and trading terms and they are especially useful for fast growing businesses, or where there are seasonal peaks and troughs.

Our partner business, BM Structured Finance, has strong relationships with a number of providers and they will work together to tailor the facility to best suit your individual business requirements. Contact Simon Belton of BM Structured Finance to find out more about the various funding options available to you to release cash flow from the assets of your business.