For most small companies, cash flow is king. It dictates when – and indeed whether – you can pay your bills, and can be a more important marker than profitability of whether you are likely to stay in business. Invoice factoring and discounting can make all the difference.
In simple terms, these innovative solutions allow you to borrow against the value of your invoices as soon as you issue them – at Cashsolv, we’ll lend you up to 85%. You then repay the loan, and the charges and interest, when your customers pay you.
With factoring, we take control of your debtor ledger and assign experienced credit control professionals to secure early payment, thus minimising the interest you pay, whilst with invoice discounting you retain control of your own debtors so that your customers do not find themselves dealing with a third party.
But what are the advantages and disadvantages?
• Factoring and invoice discounting can tame a troublesome cash flow
• Late-paying customers cease to be a problem and can no longer derail
• This is a great way of borrowing for start-ups or companies with poor
credit ratings who cannot access other forms of finance.
• As the name “invoice discounting” suggests, you won’t get 100% of the
money your clients pay, due to our fees.
• If your clients tend to pay fairly reliably to begin with, this could prove a
relatively expensive solution to a comparatively minor problem.
• If you opt for factoring, your customers may not be keen to deal with a
third party over their debts. (This does, however, mean that you no
longer need to employ someone to deal with accounts payable.)
Would a loan work better?
This can prove cheaper than invoice factoring or discounting but can be more difficult to arrange, particularly if you approach a bank rather than an alternative lender like Cashsolv.
As a minimum, a bank is likely to require a respectable credit score plus a proven track record – not to mention a mountain of paperwork. Also, bear in mind that once the loan is repaid your cash flow problems could continue, whereas with invoice factoring and discounting you can continue to get paid as soon as you issue invoices.
Don’t forget to talk to Cashsolv
Cashsolv are experts in all forms of business finance. To discover what we can do for you, please visit our business finance page.