A review of the market for single invoice finance market shows that some funders don't match the attractive terms offered by Cash for Invoices Limited's single invoice finance service.
One funder offers bad debt protection but as an extra (on top of its service charge and finance charge) for its confidential invoice discounting. It also requires a turnover of at least £3 million to provide invoice discounting.
The funder has the audacity to claim its new product is a 'one-fee product' yet it charges one-off fee plus an ongoing fee. One plus one equals two fees. Its fee is based on turnover which might be more than actually achieved, so pushing up its fee.
Cash for Invoices Limited's single invoice finance service has one fee only, and that is based on the actual value of an invoice not expected turnover. It is a far fairer and transparent method of charging. There is no upfront fee, and no minimum turnover. The cost of credit protection is included in its fee; it is not an optional extra.
One so-called cash flow lender charges up to 144% pa and a management fee and an arrangement fee (for successful applications). It can also demand a debenture and personal guarantees from directors or partners. Cash for Invoices Limited's single invoice finance service requires no security no management fee no arrangement fee and its annualised fee is far far below 144% pa.
One invoice funder will not buy an invoice with a value under £5000, ten times higher than the minimum set by Cash for Invoices Limited's single invoice finance service. Cash for Invoices Limited therefore enables micro and small businesses to sell their small value invoices for cash when other invoice funders would say no.
The same funder's fee is a minimum of 5% of the invoice value. Another funder charges a flat 3% per month. Cash for Invoices Limited's single invoice finance service currently charges a fixed fee of just 2.5% of the invoice value.
Another funder requires a minimum turnover of £100,000 for its factoring service, and offers facilities, so will not buy single invoices.
A business might consider alternatives to single invoice finance. One P2P platform says it charges interest (paid to platform investors) of 8-13%pa, takes 2% arrangement fee and a further (undisclosed) ongoing fee to administer the loan on the platform (assume this is 1%). For a 3 month loan, the all-in cost would be 5%. That is DOUBLE the charge from using Cash for Invoices Limited's single invoice finance service.
Even if costs of finance were acceptable, one funder illustrates that the time to obtain funds is likely to be unacceptable: it says 3 months from enquiry to cleared funds is likely. The same funder has a minimum loan of £500,000, that is 1000 times greater than that of Cash for Invoices Limited's single invoice finance service.
As illustrated above, relatively high fees and onerous terms are avoided by using Cash for Invoices Limited's single invoice finance service.
To find out about its service, contact Cash for Invoices Limited.
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 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
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 company 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 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.
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, 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 company 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.
Supplier invoice finance offered by Cash for Invoices Limited
Cash for Invoices Limited also helps companies who need more time. Why do they need more time? Because suppliers who have sent them an invoices are demanding payment but the company needs more time to pay.
In such situations, Cash for Invoices Limited can offer to buy the supplier single invoice for cash. That cash is paid to the supplier not to the company Cash for Invoices Limited is helping. Having got the supplier off the company's back, Cash for Invoices Limited allows the company the extra time it needs to get cash and then to use that cash to pay Cash for Invoices Limited for the supplier invoice Cash for Invoices Limited purchased.
Cash for Invoices Limited's single invoice finance service therefore helps companies (sole traders and SMEs) who either need cash or who need more time.
To find out more about Cash for Invoices Limited's single invoice finance service contact Cash for Invoices Limited.