Consumer credit dangerously high: single invoice finance is not an option

The FT reported how consumer credit has risen consecutively for the last 56 months.  Unsecured consumer loans have risen for the forst time above their 2008 level.  The Bank of England reported bank underwriting standards have loosened.  It illustrates the return of irresponsible and risky lending by banks - once again, to earn more profit.  If regulators and the Bank of England do not step in to control the risk levels, another crisis could ensue, this time centred on the consumers not the mortgage market.

Consumers do not have the ability to do as companies are able - resort to the use of their invoices to raise cash - a process called invoice finance or debt factoring.

Debt factoring   
Conventional debt factoring (also known as invoice finance) is a useful alternative to borrowing more debt to obtain cash.  It involves the sale of invoices (from credit sales) in exchange for immediate cash.  To manage the risk the debtors will not pay for their purchases (credit risk), the factor will purchase invoices for around 80% of their value and pay the balance when the debtor pays, less the factors's fee.  The factor will usually also want a debenture over the company's assets and possibly also directors' personal guarantees.

Factoring fees can be of many types including arrangement, servicing, renewal, and credit protection fees.  These inevitably raise the all-in cost of factoring for the company, but its benefit are immediate cashflow without adding to debt levels, and transfer of credit risk to the factor (though some factors transfer credit risk back to the company if the debtor defaults).

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:

• NO   security.  No debenture or personal guarantee is provided by the invoice seller.  This makes the funding process less complicated, less expensive, and quicker to complete for the seller
• NO   commitment to sell an invoice. The seller has no obligation to sell its entire sales ledger to the funder.  The seller might be flush with cash at times yet with debt factoring it is forced to take funds from the factoring company, and pay associated costs of the facility.  This is inefficient and undesirable.  Single invoice finance from Cash for Invoices Limited requires no commitment so is far more efficient as a source of funds - used only when the seller wants funding.  Because there is no ongoing funding, associated costs are avoided.
• Almost all types   of businesses eligible.  Cash for Invoices Limited is available for many types of organisation.  In addition to limited companies, this includes LLPs, charities, social enterprises and academic institutions.  Single invoice finance from Cash for Invoices Limited opens up a new source of alternative finance for these organisations that might have found it difficult to find funding from other sources.
• Sell just one   invoice.  Since no facility is set up and no commitment is required to sell its entire sales ledger, the seller may sell just one invoice, and whenever it chooses.  With single invoice finance from Cash for Invoices Limited, the seller is in control of funding not the factoring company or bank lender.
• One   fee only  Since no facility is created with single invoice finance from Cash for Invoices Limited, there are no ongoing costs of financing nor none of the associated set up or termination costs
• No recourse   (beyond retention) if the invoice debtor defaults  If the debtor fails to pay on time, some factoring companies sell the invoice back to the seller and demand a return of money it gave to purchase the invoice.  Once an invoice, Cash for Invoices Limited retains credit risk
• Credit protection included   - some funders add a charge if the seller wants to completely transfer the risk of default by the debtor.  Single invoice finance from Cash for Invoices Limited does not charge extra for credit protection.

To find out more about Cash for Invoices Limited's single invoice finance service contact Cash for Invoices Limited or call 0208 987 0429.  Cash for Invoices Limited will consider invoices sold by businesses (or their customers) located in Ealing, Hounslow, Hammersmith, Richmond, Kingston, Harrow, Acton, Brentford, Chelsea, Kensington, Holland Park, Barnet, and the north, south, centre, and east of London, plus other regions of England, Wales, and Scotland, and overseas.