TSMC - the big chipmaker, is spending so much on expansion of its operations that the costs of capex are eating into margins, reports the FT
TSMC should use invoice finance to raise cash for capex says Cash for Invoices Limited – the single invoice finance specialist.
Cash for Invoices Limited - the single invoice finance specialist of London, explains how single invoice finance works:
Introduction to invoice finance
Cash for Invoices Limited of Chiswick London is an invoice finance company that specialises in buying single invoices off an SME in exchange for upfront cash. Unlike other providers, Cash for Invoices Limited only charges ONE fee, and gives the SME these other benefits:
NO commitment on you to sell further invoices NO arrangement fee NO facility NO charge over assets and NO debt
Cash for Invoices Limited of London offers a simple, transparent and flexible invoice finance service that helps the SME or sole trader get the essential cash they need.
What is an invoice?
Invoices are a form of trade receivable, i.e., they are an asset on a company's balance sheet representing money to be received by that company at some future date - at the time the debtor pays the invoice. At that time, the debtor (payer of the invoice) will no longer appear on the company's balance sheet and instead it will be replaced by an equal amount of cash (which is also an asset). There is no net increase or decrease in assets, merely conversion from one to another.
If that debtor does not pay, then the asset will be written off as a bad debt (a cost in the profit & loss account) and assets will then reduce (no cash came in). Granting time (credit) to buyers to pay for their purchases is therefore an example of credit risk for the company giving time.
If later - perhaps through credit collection procedures - the debtor pays the invoice, then the bad debt is added to the p&l as a profit (income) and cash increased by the amount received. The assets (cash) increase and are offset by an increase in profit (equity on the balance sheet). All is well again.
Selling an invoice to Cash for Invoices Limited
Cash for Invoices Limited is a provider of cash and is not a debt collector, so it only buys invoices that are not in default, i.e., where the debtor has failed to pay.
Before the debtor defaults, the company can sell the invoice to a company such as Cash for Invoices Limited that will offer to buy just one invoice when the company wants to sell.
There is no commitment for the SME to sell, and no commitment for Cash for Invoices Limited to buy. The company wants to exchange an invoice for cash - perhaps it needs the cash sooner than the invoice payment date.
Cash for Invoices Limited will make an offer after conducting due diligence on the selling company and on the debtor especially. The debtor is a key concern for Cash for Invoices Limited because if there is a subsequent default then Cash for Invoices Limited will not require the seller to buyback the invoice. The invoice sale is therefore non-recourse and Cash for Invoices Limited has to suffer the consequences of a default. It will commence steps to recover the debt. These can include issuing letters for payment, appointing a solicitor, making a court claim, or making a claim under a credit insurance policy.
Personal Guarantee in the event of invoice default
Cash for Invoices Limited might require a personal guarantee of the director(s) of the SME who is selling the invoice, in case the invoice sold is not repaid by the debtor.
Retention to mitigate credit risk
To mitigate the potential costs of trying to recover payment on an invoice that Cash for Invoices Limited purchased but which goes into default, Cash for Invoices Limited will retain up to 10% of the value of that invoice from the purchase price. If there is no default (the debtor pays the invoice on time and in full) then Cash for Invoices Limited will pay the retention to the seller when the debtor pays the invoice.
Features of single invoice finance offered by Cash for Invoices Limited
In addition to being non-recourse (except where a personal guarantee is provided), Cash for Invoices Limited does not require a commitment from the seller to sell all its invoices, nor will Cash for Invoices Limited charge an arrangement fee for a purchase.
Cash for Invoices Limited will not ask for ongoing fees because there is no facility between the seller and Cash for Invoices Limited. The transaction is entered into whenever the SME needs cash and Cash for Invoices Limited agrees to purchase the single invoice or multiple invoices. Compared to bank factoring facilities, Cash for Invoices Limited's single invoice finance service is far more simple and has no tie-ins and far fewer fees, just one.
Cash for Invoices Limited's single invoice finance service therefore helps companies (sole traders, SME, charity, social enterprise, and limited partnerships) who need cash.
To find out more about Cash for Invoices Limited's single invoice finance service contact Cash for Invoices Limited at firstname.lastname@example.org.
Cash for Invoices Limited will consider buying invoices where the SME and its debtor are located in Ealing, Hounslow, Hammersmith, Richmond, Kingston, Harrow, Acton, Brentford, Chelsea, Kensington, Holland Park, Barnet, and the north, south, centre, and east of London. Cash for Invoices Limited will also consider invoice purchase from other parts of the UK.