• Funding Differences Between Invoice Discounting Companies

    Our recent search for quotes from across the market on behalf of an invoice discounting client has also identified differences between the funding approaches of different invoice discounting companies.

    Based on the quotes provided for a client, we set out to compare the funding levels offered by different invoice discounting companies that we spoke to. The two areas of comparison that we focused on were the "prepayment percentage" and the "facility limit". You might expect that these would be similar for an average client but there were variations across the field.

    Prepayment Percentage

    We found that almost a third of the invoice discounting companies were prepared to quote 90% prepayment against invoices, whilst the remaining majority quoted 85%. It could be a crucial difference when a business needs to access the maximum amount of funding possible.

    For example, taking an average sales ledger of £100,000 of outstanding, unpaid sales invoices, an 85% prepayment could yield up to £85,000 of funding (ignoring any other restrictions or reserves). A 90% prepayment level could release up to £90,000 i.e. an additional £5,000 of funding - approximately 6% more than the lower funding level. An additional £5K might be very useful additional working capital.

    It is then also the case that a higher prepayment percentage (sometimes called an early payment percentage, or funding level) will continue to unlock additional funds, as and when new invoices are raised.

    Once again, a £5K invoice funded at 85% would release £4,250 rather than £4,500 at 90%.

    Facility Limit

    The facility limit is less of an issue for companies as discounters will tend to increase them if required. It serves as a maximum cap on the level of funding allowed. Often they are only implemented in order to ensure that funding levels don't increase significantly without the opportunity to review the facility. However, sometimes reviewing a limit can attract a fee and the level that it is set at could be an indicator as to how flexible a funder might be prepared to be.

    In our example, based on the anticipated "funds in use", the amount that they customer expected to borrow at any time, the highest facility limit offered was approximately 1.7 times the level of funds in use (offered by almost a quarter of the funders that we spoke to). Whilst the lowest limit offered was just 1.14 times the level of funds in use. It could be argued that this would offer little room for growth and might result in the company needing to renegotiate soon after commencement.

    Understanding The Differences In Funding Levels

    Once again we are able to use this kind of research in order to help clients understand the differences in funding levels, between providers.

    Share with:

Related articles

  • Read More

    Comparison of Invoice Discounting Funding Percentages

    If you are looking to use invoice discounting you may want to find a provider that will be flexible and release the maximum percentage of your unpaid sales receivables. As with all aspects of the facility structure e.g. pricing, premiums for debtor protection, discount charge and facility limits, there are differences between providers, and what they will quote when it comes to funding levels.My...

  • Read More

    Protected Invoice Discounting Prices

    Protected invoice discounting (PID), is where the discounter includes bad debt protection (also known as non recourse), in addition to the provision of funding against your unpaid sales invoices. This is still a confidential invoice financing product, but with the addition of debtor protection to protect against bad debts.We looked specifically at how the cost of that added protection compared...

  • Read More

    CID Pricing Can Vary By Salesperson

    We have just seen a good example of how CID pricing can vary by saleperson (confidential invoice discounting), within a single organisation.This example also demonstrates how difficult it is for clients to keep abreast of the best rates on the market, even if they have a reasonable understanding of the various providers and what has been on offer historically.We recently checked some prices for...

  • Read More

    MarketInvoice Select Fixed Term Contract

    MarketInvoice, the peer-to-peer finance platform has launched another development to its growing portfolio of invoice discounting products.MarketInvoice SELECT offers customers the ability to pick and choose invoices to receive funding against, but there is a new fixed term deal, whereby customers have the option to have a fixed monthly fee, rather than a percentage charge of the invoices funded....

  • Read More

    Independent Advice?

    We have just had a meeting with one of our funding partners and we discussed a situation where an interim finance director joined a firm and then advised the business to move to an alternative invoice finance provider. The interest thing about the advice was that the new provider was a newly established business, one that we know well, but it made me wonder why they would be recommended over and...

  • Read More

    Up To 100% Funding With Liquidity Plus

    One of our funding partners has launched "Liquidity Plus" that provides invoice discounting users with up to 100% funding, against unpaid sales invoices, for the short to medium term. The additional funding is to help businesses cope with funding problems such as periods of high customer demand or investment in capital equipment.Speak to Sean at FundInvoice on: 03330 113622 for details....

  • Read More

    Confidential Invoice Discounting

    Confidential invoice discounting provides finance, against your unpaid to sales invoices, without any interference with your customer relationships. In fact, the entire arrangement is completely confidential from your customers: Confidential invoice discountingThe benefit of confidential invoice discounting is that you receive cash flow finance but you can retain your credit control function in...

  • Read More

    Auction An Invoice

    If you want to auction an invoice, get in touch and we can explain the options available. An eBay style auction for one or more sales invoices ensures that you get the best price for funding against that invoice. Other alternatives to an invoice auction are: 1) Spot factoring - selected single invoices purchased by a single factoring company. 2) Whole turnover invoice finance - all your sales...

  • Read More

    Invoice Discounting

    We have many resources about invoice discounting: 1) How does invoice discounting work? 2) List of Invoice Discounting companies. 3) Invoice discounting case study. 4) Cost of Invoice Discounting For more information or to discuss your particular requirements please contact Sean on: 03330 113622 or view the CID section of our website....

  • Read More

    Invoice Discounting With No Additional Charges

    If you are unhappy with paying additional fees for invoice discounting, please see yesterday's post about invoice discounting with no disbursements. Charging additional charges is common within the invoice discounting industry and these are often levied for particular transactions such as making a payment by CHAPs transfer. This new invoice discounting product does away with the additional...

  • Read More

    No Disbursement Charges

    One of our invoice discounting partners has just launched a confidential invoice discounting facility, for businesses with a turnover of at least £3 million, that has no disbursement charges whatsoever (providing you stay within the terms of the facility. The only charges are a one off arrangement fee, the Administration charge, for operating the facility and a discount charge, which operates in...

  • Read More

    Confidential Invoice Discounting Despite Previous Business Failures

    This news article explains how FundInvoice LLP were able to help a business that had prior failures behind them secure a Confidential Invoice Discounting facility from a reputable discounter: Confidential Invoice Discounting Despite Previous Business Failures...

  • Read More

    50% Cost Saving For Confidential Invoice Discounting Client

    We have just found one client a 50% cost saving on their confidential invoice discounting costs - here is a case study: 50% Saving On Confidential Invoice Discounting Costs...

  • Read More

    FundInvoice Completes Its First Invoice Finance Client Switch On

    FundInvoice LLP, our new brokerage for invoice finance, factoring and invoice discounting is off the ground with its first client switch on!We managed to complete a Confidential Invoice Discounting facility for a client that had overdraft restrictions. The client also raised applications for payment, which are common within the construction sector, but FundInvoice were able to find them a finance...

  • Read More

    Deal Completed - CID Found For A Factoring Client

    We were able to assist an engineering client of a factoring company that wanted to move to Confidential Invoice Discounting (CID).Confidential Invoice Discounting enables the client company to undertake their own credit control activity without their customers knowing that there is an invoice discounting company involved. This facility was not available from the client's existing factoring...

  • Read More

    Deal Completed - Confidential Invoice Discounting

    Another invoice finance deal completed - this time we found Confidential Invoice Discounting (CID) for a Printed Circuit Board (PCB) and Cable Assembly supplier. We were pleased to be able to find them a cheaper CID facility that was also more straight forward than their existing facility.Confidential Invoice Discounting provides funding against the outstanding unpaid sales invoices of your...

  • Read More

    Deal Completed - Invoice Discounting Recourse Period Improved

    Only the other day I put up a piece about how invoice finance recourse periods work and how we may be able to help clients find improved recourse periods: Recourse Periods and this is a good example of how that can help a client.The business in question had a restrictive recourse period that was being applied to their account of 90 days although their payment terms were 60 days from the end of...

  • Read More

    Choice Of Single Fee Invoice Discounters Broadens Again

    Single fee invoice discounting is where an invoice discounting company offers a single charge rather than the traditional combination of administration charge, discount charge and other additional charges pricing structure. This can make the cost of invoice discounting very easy to calculate and predictable.There are numerous providers that now offer this type of structure and we have just been...

  • Read More

    Deal Completed - Invoice Discounting Despite Poor Financials

    We were recently able to help an established London-based business which was turning over £2 million per annum.They had an invoice finance facility from their bank and invoice finance company but they had been told, 2 years ago that they were no longer suitable for invoice finance due to their poor financial accounts.The company was looking for a confidential invoice discounting facility in...

  • Read More

    Even Small Value Invoices Can Be Funded But Not By All Invoice Finance Companies

    We have had a recent case whereby an existing invoice finance client of a bank backed invoice finance company was unable to receive funding from their invoice finance company against many of the invoices that they raised due to their small average invoice value. Their sales ledger was such that there were a handful of bigger customers with larger balances and these were eligible for funding....

  • Read More

    The Pros And Cons Of Invoice Discounting For Businesses Considering Using Invoice Discounting

    I recently published a list of the pros and cons of factoring and so to complete the record I thought I would also publish a list of the pros and cons of invoice discounting for the benefit of any businesses that are considering using invoice discounting. Many pros and cons are similar for factoring and invoice discounting but there are some subtle differences:...

  • Read More

    Deal Completed - Invoice Discounting For A Business Turning Over £14M

    Invoice finance is certainly not just for small businesses although we have been able to help many of them over the years.In the case of this business that we dealt with recently, they were turning over 14,000,000 per annum and they were seeking an invoice discounting facility in order to generate the finance that they needed to grow further.We were able to find them an invoice discounting...

  • Read More

    Deal Completed - 8% Increase In Profits Achieved

    This is an interesting example of a plumbing, drainage and maintenance services company that we were able to help find an invoice discounting facility.The business wanted to use the funds advanced through the invoice finance facility, released against unpaid sales invoices, in order to enable them to restructure their business.After the client had been using their invoice discounting facility for...

  • Read More

    Deal Completed - Confidential Invoice Discounting For A Haulier With An Insufficient Overdraft

    We were recently able to help a transport company based in Southern Ireland (Eire) to obtain a confidential invoice discounting facility when their overdraft facility was insufficient. This haulage business had previously used a form of invoice finance but they were unhappy with the facility and the service that they had received so they had left the market completely. In order to fund their...

  • Read More

    Example of How Not Understanding Invoice Finance Can Cost Money

    Much of the research that I have published recently has suggested that there is a general lack of understanding amongst businesses about invoice finance products. We have just seen the perfect example of a prospective customer not understanding how invoice finance products work which has been costing them money.Our Invoice Finance brokerage has been in contact with a prospective customer that was...

 

 

Examples of just a few of our finance partners:

leumi abl
pulse cashflow finance
ifg
castle
ultimate finance group
ashley