Compare Factoring is a specialist invoice finance brokerage. We’ve chosen to keep to our niche to give confidence to our clients that we are the right advisor to support them when looking to release funds against outstanding invoices. In a market where there are so many options (and so many comparison sites), we’ll always argue it’s important to speak to an invoice finance professional to support you in your decision-making.
In a nutshell, we’ll help you:
Why use an invoice finance broker?
We’re here to help you get the best invoice finance rates for your unique business circumstances. Here are some of the ways in which we provide expert, impartial and free guidance to our clients.
We’ll make sure you’re looking at the right product
We’ll listen and understand your business’s requirements before explaining which invoice finance options are available to you. Whether it’s factoring, invoice discounting, selective invoice finance or spot finance, we can introduce you to the best suited lenders to support your business’s cash flow. Not all lenders offer the full sweep of products, so we can shortlist several providers to make sure you have coverage across all appropriate options.
We’ll make sure you’re speaking to the best suited funders
If you’re not an invoice finance professional, you won’t have access to the full market. We partner with 95% of lenders to make sure we can support all types of enquiry. It’s something even the best comparison site can’t offer.
We’ll help you compare your offers
Once you’ve received offers, we’ll help you decide on which will work best for you. Lenders often use different terminology for the same fees, which can make a fair comparison challenging for any decision-maker. Strong competition in a crowded marketplace is driving prices down, so we’ll help ensure you’re getting the most for your money.
We’ll give you a clear breakdown of the key costs, benefits, and drawbacks of each offer we have for you. As well as talking you through the breakdown, we’ll also send you the comparison to keep, so you can tweak the numbers to see how this will affect the overall costs of a facility over time. With our support, we’re confident that we can help you secure the best rates for your invoice financing.
We provide free support along the way
We don’t charge clients for our services. Instead, we’re paid a commission by the lender after a successful introduction.
As well as pointing you in the right direction, we provide ongoing support to help with your decision-making as your business grows. As well as looking at the costs of each offer, you can use us as a sounding block for any other questions you have in relation to your funding requirements.
Even once you’ve partnered with a funder, we’ll keep in touch to make sure the facility is working as expected and still adding value to your business.
Our expert advice is 100% impartial and 100% free. Why not give us a call? 01322 741425
What can affect the cost of invoice financing?
Whether you’re looking for factoring or invoice discounting, your lender will take a number of criteria into account when assessing the cost of your invoice finance facility. Here’s a quick overview of the main ones.
Volume of invoices
Put simply, the higher the volume (and value) of your invoices, the lower your invoice finance costs will be as a proportion of turnover.
If you’re looking at a factoring facility, it’s worth remembering that credit control requires more legwork for lots of smaller invoices compared to fewer larger ones, so this may bump up your funder’s fees. In this case, it may be worth considering CHOCCS, where Client Handles Own Credit Control Services.
For the same reason, invoice discounting tends to be a less expensive option since no credit control function is provided.
Risk
The funder’s assessment of risk can be split into categories:
Your customers’ reliability/creditworthiness – unsurprisingly, having reliable clients with a solid track record of settling invoices on time will get you access to lower invoice finance rates.
The strength of your invoicing process – If your invoicing is backed up by tidy paperwork to show the work has been completed and signed off by the customer, this will make your invoices far more attractive to fund. If, on the other hand, there’s no sign of a robust invoicing process in place, some funders won’t even consider funding your invoices.
Your invoice payment terms – The longer your customers take to pay their invoices, the greater the risk, so the higher the invoice finance provider’s rates will be. For example, a 30-day invoice payment period will command lower rates than a 90-day one.
Your industry – The work you do will have some bearing on your invoice finance rates. For example, construction is deemed higher risk than other industries, resulting in comparatively higher rates. Likewise, if non-payment is common in your industry, you can expect to pay more for bad debt protection.
For industries like recruitment where invoice payment is relatively straightforward, you can expect lower rates for your invoice finance.
Your business status – Your lender will consider your own reliability and longevity as a business, as well as your turnover when deciding on the appropriate rates to offer you. Many (but not all) invoice finance providers in the UK will want you to have a year’s trading under your belt, or to meet a minimum turnover requirement.
If you don’t fit certain criteria, this is where a specialist broker can help.
Based on the above, invoice discounting providers tend to prefer clients with high turnovers and proven credit control processes in place. Factoring providers are more open to working with SMEs with lower turnovers as they take on the credit control duties themselves, which helps them mitigate the risk.
Whatever the size of your business, we’re confident we can help you identify the best invoice finance product and negotiate the best deal from lenders for you.
What is the discount charge/fee?
The discount fee is the main charge incurred as part of your invoice financing arrangement. In essence, it works in the same way as interest on a bank loan, credit card or overdraft. It’s charged against the cash that you borrow from your outstanding invoices.
As a rule of thumb, we say that rates will most likely vary from 1.75% to 4% above bank base rate. These percentages are annual costs so if you want to calculate the fee % per day, just divide the rate by 365.
What other charges are involved?
Working with us means you’ll be 100% clear on any additional charges involved in your invoice finance facility from the outset and before you enter into any agreement with a lender. It’s worth noting that these costs can differ significantly from one provider to the next, so we’ll help you take a composite view of your various quotes from lenders. Not only that, we’ll negotiate the best rates.
As well as the discount fee (i.e., the cost of the borrowing itself), the other important charges to consider are:
Service fee – essentially the regular subscription charge for administering your invoice finance facility.
Bad debt protection fee – sometimes called credit protection, this is an insurance premium to protect you against customer non-payment. Only applies to non-recourse factoring arrangements (as the funder is liable for any non-payments).
The typical range we see is between 0.2% and 1.2%.
Collection fee – a charge to cover the cost (in the case of invoice factoring) of handling your credit control activities for you. Also known as the credit management fee, this is normally included within the service fee.
Termination fees – additional fees incurred for breaking your contract early (as you would expect from a telecoms provider, for example). The industry standard is a one-year contract, but we work with some well-respected lenders that offer a 6-month trial period, meaning our clients can test out a facility and make sure it’s right for them before committing to anything longer-term. Likewise, if you only have a short-term invoice finance requirement, we can absolutely structure the terms of the contract and notice period to suit your business needs.
Our marketplace knowledge and expertise means we’re best placed to advise on the ins and outs of invoice finance and secure you the best deal out there. Better still, our advice is 100% free.
Invoice Finance is a perfect way to help your business manage cashflow and to remove the headache of late payers. There are a number of ways that an invoice finance facility can be structured and it can be tailored to your preferences.
Why not try our “help me choose tool” to allow us to support you in making the right decision for your business in 4 easy steps?
