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Any business which operates in the construction industry or any business which invoices stage payments as part of a contract knows how difficult it is to obtain funding . Some banks maybe prepared to offer some form of overdraft however as soon as you mention contracts to most factoring and invoice discounting companies they will run a mile. The good news is that there two finance companies providing invoice finance against applications in the construction or any industry involved in stage payments. Depending on your own particular circumstances XL business finance will help you find the most appropriate invoice finance company.

However the two finance companies are very different indeed. One is a bank owned finance company and the other is an independent finance company. The independent company  is in our opinion the leading finance company in this sector and will fund  uncertified application. It also understands that actual payments against application maybe slightly different from the money received and it also understands that VAT and PAYE may have been deducted. In our experience finance via the bank maybe a bit hit or miss. Their  headline prepayment might be higher however they will have a very strict funding limit therefore as the business grows it might be difficult to obtain increased funding. As this is one of the big banks the level of service tends to be a bit hit or miss and not all the account managers understand contractual invoicing. If payments are slightly different they will put the cash to a suspense account because it doesn’t exactly match leading to disallowed credit limits and further reduction in funding.

I addition not all their account managers will pay against uncertified applications preferring to pay against certified invoices which can delay payment further!!!

There are so many invoice finance products and companies to choose from. A quick search on the internet will reveal hundreds of finance companies all offering similar products and services. Although invoice finance is mainly about getting cash against unpaid invoices there can be a big difference between the many different companies and how they deliver their product. To make sure you get the best factoring or invoice discounting facility for your business it is advisable that you speak with a specialist independent factoring and invoice discounting broker. A good one will know the market better than any accountant and going to your bank for financial advise will be like going to your butcher for open heart surgery.

Thankfully XL Business finance has access to twenty or more factoring and invoice discounting providers. We know the market extremely well and following a brief consultation we know exactly which provider will be best suited for your own particular requirements. We will recommended two possibly three finance companies that we believe will provide the best service for your own unique set of circumstances. The good news is that this does not cost you a penny. We will get an introductory commission from the finance company. All factoring companies pay roughly the same commission so we are not tied in one any one finance company. It would be pointless introducing a business to a finance company that wont provide the best service. The most important thing is that we get you with the right finance company and that you stay with that finance company.

There are many different factors which will influence our choice of finance company. Do you need factoring or invoice discounting, geographical location is important, turnover, number of debtors, quality of debtors, debt turn, how long your business has been established and the level of profitability are all important aspects and ill have a bearing on the right finance company.

Without a doubt we would recommend invoice finance over a bank overdraft any day of the week. There are obviously exceptions of course. Invoice finance provides 80% of your unpaid invoices as soon as you have raised your invoice. It provides a flexible approach to your working capital requirements. Obviously this wont work if you are getting cash on delivery or on the point of sale. Uner these circumstances you would need an overdraft facility to provide you with adequate working capital.

There are many advantages to invoice finance compared with a bank overdraft. Overdrafts are normally secured aginst property and are fixed at a set amount with little scope for increasing as your business grows. More importantly it should be noted that a bank overdraft is repayable on demand. If your business takes a turn for the worse potentially the overdraft can be withdrawn without notice. Unfortunately in the current economic climate we have seen happen all too often. This will never happen with an invoice finance facility.

Invoice finance can be provided by way of a number of products. Factoring in addition to providing cash against unpaid invoices provides a credit control facility. Invoice discounting can be provided on a confidential basis and as such only provides a working capital facility. Invoice discounting is suitable for more established businesses who will have their own credit control facilities in place. Different finance companies provide slight variations on these two products but in main these are the two most common invoice finance products.

A quick search on google will reveal hundreds of potential finance companies. Banks are good at invoice discounting however there are independent companies that are capable of providing an equally acceptance product. As a rule of thumb independents are better at providing factoring products. XL Business Finance can help you find the most appropriate finance company.