Invoice finance for manufacturers who manufacture products.

Why Invoice Finance Works For Manufacturers

Manufacturers have always been typical users of invoice finance (IF), such as factoring and invoice discounting.

Our own research identified that manufacturers make up the largest segment of users of IF, accounting for 25% of respondents in our independent survey. The next largest segment was labour hire, which only accounted for 7% of our sample.

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There are a number of reasons why we see so many manufacturing companies turning to this type of funding to boost their working capital position.

Reasons Why Manufacturers Use Invoice Finance

The reasons for this high usage level within this sector include the following:

  1. Gross Profit Margins - typical gross profit margins, amongst manufacturers, may range from 25% to 35% so the prepayment from invoice finance (typically 85% of invoice value) will allow a manufacturer to pay for their raw materials and other costs before they get paid. Discounts with suppliers can often be negotiated when you have cash to pay quickly.

  2. Payment Terms - historic reports into late payment by sector identified 3 manufacturing sectors as among the sectors having to wait the longest for payment. Studies have found that in only a small percentage of cases, manufacturers were paid on time. These delayed payments create a cash flow gap between having to pay suppliers for raw materials and getting paid. Invoice finance bridges this gap.

  3. Straightforward Transactions - the nature of manufacturing is such that it normally gives rise to simple transactions. You make something, ship the product and get paid for it. This type of straightforward transaction is very appealing to invoice financiers as they can easily value such debts, to fund against them.

  4. Seasonality - some manufacturing can be very seasonal by nature e.g. manufacture of fireworks. In such cases, there may be a need for temporary cash flow assistance to get through peak trading periods. Some invoice finance solutions allow you to selectively use the funding as and when you need it, controlling costs.

  5. Expansion - during times when manufacturers are expanding rapidly, they often turn to scalable invoice finance to support their cash flow during rapid growth.

So the high proportion of invoice finance users within the manufacturing sector is not surprising when you consider the above points.


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    Examples of funders we work with:

    berkeley
    investeccapitalsolutions
    pennyfreedom
    seneca
    acg
    inksmoor