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Michelle Monck

Consumer Finance Expert
Published: 25/06/2021
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Article written by Evette Orams, Managing Director at Hilton-Baird Financial Solutions, our preferred invoice finance broker.
The views expressed are those of the author and does not endorse the content.


While there is a wide range of commercial finance options available to businesses, few provide the versatility, flexibility and overall support package that invoice finance can.
From start-ups looking to maintain access to working capital as they grow, to multimillion pound turnover companies taking advantage of expansion opportunities, invoice finance helps businesses overcome a whole host of cash flow challenges at each stage of their journeys.
In this article we look at six common cash flow challenges that invoice finance can solve, with real-life examples of businesses who’ve benefited from their facilities.


1. The cash flow impact of trading on credit terms

While trading on credit terms brings several benefits to businesses, it can also be one of the main causes of cash flow challenges. Because goods or services are provided in advance of receiving payment by customers, cash can be tied up for long periods.
This is perhaps the key benefit of invoice finance, as up to 90% of the invoice value is advanced by the funder within 24 hours of being raised, with the remainder forwarded once the customer pays – less the funder’s fee. This enables the business to pay suppliers and meet day-to-day costs without having to wait until customers have paid.
This was the key driver for one of our clients, a steel supplier, who have been using invoice finance to keep cash flowing whilst trading on credit terms. The additional credit management service that their factoring company provides was an additional bonus, removing the time and resource burden of performing this function in-house and giving them more time to focus on growth.


2. Rapid increase in sales

While a sudden influx in new orders can be fantastic for businesses, it can also bring significant cash flow challenges – especially when trading on credit terms. The difficulties explained above are exacerbated when even more orders need fulfilling in a short space of time; so again, in this scenario, invoice finance can make a huge difference, allowing the business to take on new orders they otherwise wouldn’t have been able to support.
A client of ours, a metal fabrication and engineering business, was faced with this very challenge when they approached us. They were experiencing substantial and sustained growth and recognised their existing overdraft could no longer keep up with the speed of their expansion. By getting to know the business and its requirements, we identified suitable factoring facilities that would solve their challenges, with facilities again incorporating credit control to give the management team more time to focus on satisfying the increased demand.


Calculate how much funding your business could release against the value of your sales ledger and discover which invoice finance facility could be best for your requirement

3. Taking on larger orders

While the above two examples describe businesses which benefit from ongoing cash flow support, sometimes requirements are more short-term. For example, if your business receives an order that’s particularly large (or perhaps the customer has asked for longer-than-usual credit terms), it may not always be possible to access the funds to meet requirements and fulfil the order.
A London-based wholesaler of beauty products secured a spot (selective) factoring facility with our help. Not only did this enable them to accept larger orders and choose which invoices to release funding against, their improved cash position also meant they could move from placing small monthly orders with their suppliers to larger quarterly orders. The result was that they could streamline their purchase process and benefit from the savings gained through bulk orders.


4. Supporting start-ups

A key benefit of invoice finance is that it optimally supports businesses of all sizes – including those with little or no trading history.
When launching his new business, which designs and manufactures tooling for the foundry industry, the Managing Director recognised the importance of having the right funding in place to support his plans as well as the right machinery to get started.
We introduced a number of suitable options, and the factoring facility he opted for enabled the business to keep cash flowing as they took on new orders – which is especially important for any start-up. Our wider expertise of the commercial finance market additionally enabled us to introduce an asset finance facility, which provided the funding required to purchase a new piece of machinery.


5. Facilitating expansion

Growth and expansion can come in many forms – not just through an increase in orders – and it’s important for businesses to have the right funding behind them to maximise opportunities as they arise. After a successful acquisition in late 2019, one of our clients, a manufacturer of recycled plastic compounds, began searching for a funding facility that would provide the working capital they needed to fund further expansion – particularly into overseas markets.
After being introduced to the Hilton-Baird team by a third party, we identified suitable facilities and funders. Within a short space of time our client had secured a £6 million invoice discounting facility with a lender who could offer the level of funding, international infrastructure and flexibility they were looking for.


6. Aiding international trade

This access to international markets is a key consideration for businesses currently, especially post-Brexit.
Having recently adapted to target clients outside the UK, a business specialising in IT recruitment contacted our team in need of a new funding facility that would support them by advancing funding against the value of their export sales and invoices ahead of payment being received.
We enabled our client to secure a £200,000 non-recourse factoring facility, which offers funding against exports as well as domestic sales. The facility has since enabled them to transact with businesses overseas – mainly within the EU – despite the additional challenges imposed by Brexit.



How about post-pandemic?

Of course, the cash flow challenges facing businesses today may be very different to those 18 months ago, but invoice finance is no less effective at supporting those affected by the pandemic.
Whether you’re looking to capitalise on the improving picture by taking on more business or you need to find the cash to service any loans you’ve secured, for instance through the CBILS or Bounce Back Loan Scheme, invoice finance can support and underpin your business plans in the post-pandemic world.
It’s also a proven mechanism to support companies throughout and following periods of recession, given the way facilities grow in line with sales.
So, if your business trades on credit terms, now is the ideal time to explore the value that invoice finance can bring to your table.

Find out more about invoice finance

Visit our Invoice Finance page to read more about Invoice Finance. how it can help businesses and get an instant quote from our preferred invoice finance broker, Hilton-Baird Financial Solutions, or contact their award winning team directly on 023 8202 9739.


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