Ok so we have established over the last few blogs that as the UK emerges out of the recession that using banks for working capital funding and in particular bank overdrafts is probably not the best form of finance. However there are so many invoice financing companies available how do you know which one will suit your particular business and who will give you the best deal. There are many factors that should be taken into consideration when choosing a provider. First there is a big difference between invoice discounting companies and factoring companies. The finance companies that are good at factoring are not always good at invoice discounting and visa versa.
Although both financeproducts will release cash against unpaid invoices of up to 80% factoring is more more of a service orientated product providing credit control as an added benefit. The idea is that you outsource this to the factoring company who will chase your customers and make sure the cash comes back to the business in a timely fashion. The cost of the factoring service is minimal compared with employing a full time credit controller. However with factoring cheapest is not always best. Although there isn’t a massive amount of difference between costs you do tend to get what you pay for. If you pay peanuts for a facility you will probably get monkeys chasing your customers if they can be bothered at all.
The service aspect is less important when it comes to invoice discounting however the bigger the financial institution the further you are away from a decision maker there if you need some flexibility a smaller company can provide quicker turnarounds. Confidential invoice discounting as it suggests is kept secret from your customers and it provides a working capital facility that unlike a bank overdraft grows with your business.
Tags: confidential invoice discounting, Factoring, invoice financing
