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Invoice Factoring & Invoice Discounting to Ease Cash Flow

1st October 2003

FSB states 25% of businesses fail but what can be done?

The Federation of Small Business recently released some alarming late payment figures:

  • UK PLC taking an average of 46 days to pay invoices
  • 66% of UK PLC failing to meet payment times
  • £20 billion owed to suppliers at any one time
  • 25% of small businesses fail due to cash flow

Four years ago the government introduced legislation which attempted to tackle this problem. By law suppliers are allowed to charge interest rates of 8% OBR on all debts aged over 30 days and charge recovery fees for late debts. This has not worked.

Why hasn't it worked? If your key relationship pays you late, would you be willing to place your company's future in doubt by rocking the boat?

Key strategies to ease cash flow:

  1. Offers to charge lower fees if you are paid within agreed times
  2. If you use cash flow finance or an overdraft, work out the cost and charge that to your late paying customers
  3. Discount your invoices - over 60 UK lenders will advance you money on invoices

Find cash flow solutions

Read More about the FSB's findings.

Who uses invoice factoring & invoice discounting marketplace?

We are often asked whether a company will be offered invoice finance. There are some basics to being suitable:

  1. You must be raising invoices or applications for payment
  2. Your invoices must be with other businesses (not the general public)

Here are some examples of the type of company who used our marketplace last month:

Maidstone
Building & Decorators
CIS 6
£650,000 t/o
Guildford
Temporary Recruitment Consultant
60% sales ledger concentrattion
£2,500,000 t/o
Uxbridge
Builders
CIS 5
£3,000,000 t/o
Blackburn
Care Home
100% local council debt
£500,000 t/o
Business Finance Marketplace

Are banks really entitled to your book debts?

As we suggested in previous editions, it seemed that a clear precedence had been set and that banks would not take priority as preferential debtors over employees and VAT payments. However NatWest recently appealed and won such a case.

This case may be taken to the House of Lords on a final appeal and there will be more to come. For the meantime it looks like the banks are winning.

Is this good for small business? This ruling means banks will be able to continue controlling a majority of the lending market via overdraft lending. This removes the ability for other smaller lenders to compete, so reducing competition and may mean increased prices.

What should you do? Always compare your bank with what is on offer from other providers. ?Don?t keep all your eggs in one basket? is sage advice for finance planning as this mitigates the risk of someone else deciding the fate of your company.

Compare business finance solutions at the Business Finance Online Marketplace

Business Finance Newsletters

Q2 Factoring Update - 09.06.2004
FSB states 25% of businesses fail but what can be done?

Brighter Outlook for Small Business in 2004 - 17.12.2003
Small Business Outlook Brightens

Government Initiative to Save SME's over a Billion on Energy Costs - 25.11.2003
ME's Waste over a Billion on Energy Costs

Protect Your Business Against Rising Rates - 12.11.2003
Ways to Protect Your Business Against Rising Rates

Interest Rates Rise by 0.25%: What it means to you. - 06.11.2003
Impact on Your Mortgages

Q4 Factoring Update: Brumark Bites - 04.11.2003
How Brumark will affect you and an invoice finance glossary

SME Economic Confidence up 22% - 28.10.2003
SME business confidence report and buying vs. leasing property guide.

Rising Crime Affects a Quarter of UK Businesses - 15.10.2003
Covers crime and how it effects UK business. Also includes finding the right finance for your business.

Invoice Finance - Easing Cash Flow Concerns - 01.10.2003
Report from The Factors and Discounters Association plus info on invoice disounting and lease financing.

Quarter 3 Insurance Update - 25.09.2003
Insurance update.

Small Business Owners Relish Their Freedom - 18.09.2003
Poll shows majority of small business owners would not work for someone else.

Q3 Mortgage Update - 11.09.2003
Trends in buy to let mortgages and commercial mortgages

Tailored solutions for your commercial vehicle needs - 04.09.2003
Report on commercial vehicle purchasing, financing and insuring.

Sources of Red Tape Plaguing UK Small Businesses - 26.08.2003
Poll shows red tape plaguing UK small businesses, plus tradesman insurance and equipment leasing.

Quarter 3 Factoring & Invoice Finance Update - 20.08.2003
New invoice factoring and invoice discounting partners, and switching from one Ffctor to another

Understanding Business Overdrafts - 06.08.2003
Business overdrafts and the alternatives.

Our Quarterly Mortgages Update - 28.05.2003
Trends in buy to let mortgages and commercial mortgages

Business Finance Online Info Centre

If you need more information on a particular product or service before investing/purchasing, try consulting our useful business finance reference section.

NB: The information on this business-finance-online.co.uk is for informational purposes only and should not be treated as business, financial, or any other form of advice.

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