A SME's or sole trader's dream business would be one where it is able to make, sell, and then collect the cash on its products before it has to pay its creditors. It would not need to worry about raising money, paying it back or paying interest or dividends. Its trade creditors would in effect be funding the business. That is a dream cashflow scenario.
Amazon the global online seller has been in that enviable position, but most companies can only dream of it. The reality is they need to spend money to buy stocks and invest capital in debtors who will not pay for months - far later than trade creditors need to be paid. For most companies therefore, working capital is not negative but positive.
Many companies do rely on their trade creditors for some of the funding, but that is far less than they need, so they borrow. This means they need to find the cash flow to pay periodic interest or if else face financial distress and ultimately insolvency.
Cash for Invoices Limited can buy one or more of the invoices companies send to their customers (debtors) to quickly release cash that the company can use - for example, to pay its debt interest or buy stock.
There is no commitment for the company to sell any invoices to Cash for Invoices Limited, so there is no facility in place. This means the company does not pay an arrangement fee or annual review fee. Nor does it give Cash for Invoices Limited any security (such as a director's personal guarantee or a debenture over the company's assets). All that is required is a single fee (the discount) plus a refundable retention of up to 10% of the value of the invoice sold to Cash for Invoices Limited. This retention is paid to the selling company when the debtor pays Cash for Invoices Limited in full and on time.
The retention is not a cash payment by the seller but a deduction from the amount Cash for Invoices Limited pays when it buys the invoice. So if the fee is say 2.5%, then with a retention of 10%, the seller will receive 87.5% of the value of the invoice. When the debtor pays Cash for Invoices Limited the full amount of the invoice, then Cash for Invoices Limited will pay 10% of the value to the seller. The net purchase price will therefore be (in this example) 97.5% of the invoice value.
Cash for Invoices Limited's single invoice purchase service helps sole traders and SMEs increase their cash by reducing their debtors outstanding, and so helps them to reduce their working capital.
For information on Cash for Invoices Limited's single invoice purchase service, click here.
To get a free no-obligation quote on hoe much money could be received by a company by selling just one invoice, contact Cash for Invoices Limited, click here.
What is single invoice finance?
Cash for Invoices Limited offers single invoice finance (sometimes called spot factoring or selective invoice finance) - a type of debt factoring that has key advantages over conventional debt factoring and invoice finance: