• Invoice Finance Is Not An Alternative To Having A Viable Business

    100% invoice finance is not a substitute for a viable business.I spotted a recent article published regarding the financial woes of a direct mail business. The business has apparently failed, despite having a 100% prepayment from an invoice finance facility. The article reminded me of how vital it is to have an underlying business that is viable, for invoice finance to help.

    Direct Mail - 100% Advance Rate

    In this particular case, the article alleges that the direct mail business owed almost £1M to creditors when it went out of business. Apparently, the direct mail business had experienced a decline in demand, including the loss of several key customers. Additionally, there was apparently significant investment made in a loss-making division that failed to make a return. These are fundamental business problems that no amount of funding will solve.

    The article goes on to explain that at that time, their funder had an advance rate of 100% on their invoice finance facility. This is a very high advance rate, there are providers that will offer this level of finance against invoices (as discussed in recent articles about 100% invoice finance), however, it is no substitute for a viable underlying business. If sales are deteriorating at a rate that expenses outstrip income, invoice finance is not going to solve the problem.

    A better option would be to review the whole business model and see if any of the business is salvageable and quantify the possible upside from an alternative marketing strategy aimed at growing the turnover.

    Free Marketing Consultation

    In cases where underlying sales are not performing as desired, we have a full service marketing agency on hand that will provide an initial free consultation to prospective customers. This can be used to discuss your issue and see if there may be scope to boost your sales. The invoice finance is a great tool to speed up cash flow, but as this case demonstrates, you have to have a viable business in the first place otherwise no level of prepayments alone will save the company.


    Insolvency Support

    If you are concerned about the solvency of your business, you can use our contact form to request a free, confidential call back from Andy Pear, an Insolvency Practitioner with Moorfields to discuss your circumstances and understand your options.

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Examples of funders we work with:

time finance
funding invoice
inksmoor
nucleus
acg
investeccapitalsolutions