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Single Invoice Finance

Factoring and Invoice Discounting has been around for a while now and it is a fairly well accepted method of funding a business. However, it usually covers all the debts owed to a client company and can be seen as expensive and bureaucratic, particularly when only a small amount of extra funding is required.

There are some new recent entrants into the funding market who are prepared to factor single invoices without a full agreement or an ongoing commitment. These are designed to give companies the flexibility to receive advance funding against a single invoice. This can be of help when a client has won a particularly large order and needs help to fund it, or if they have a particular debtor that typically takes longer than other customers to pay – in particular, government departments.

This will be an appropriate and welcome route to funding for some businesses. The ability to receive up to 95% of an invoice at the point at which it is raised will undoubtedly help some companies smooth their cashflow. It will be especially appropriate for large one-off orders that are outside the normal pattern of business. It could also be of use where there is a large rolling contract. For example, we have one client who is invoicing £50K per month to the same blue-chip client. Being able to finance this one invoice per month helps keep wages, suppliers and HMRC paid on time, but avoids having to enter into a full invoice discounting facility.

As with all lenders, these new entrants into this market have different appetites, and we are currently working through what can and can’t be done with each of them. Many businesses nowadays are familiar with Funding Circle, which supplies crowdfunded loans to UK businesses; The new invoice finance platforms that are now emerging are similar in that they are web-based and funding opportunities are fulfilled via an auction process.

New technology is rapidly changing the business funding landscape. Many of these services are using the power of the internet to bring together individuals looking for a better return on their cash with borrowers who are finding banks are difficult to deal with. These platforms typically rely on automated data feeds from the likes of Companies House and Experian, and so it is more important than ever for a business to actively manage its own credit score.

These are the kind of innovative solutions to the problems of funding UK businesses that are likely to become an established part of business borrowing in the future. It has been apparent for some years now that part of building a successful business is having a range of funding options in place to give your business resilience and flexibility.

Steve Grice

Steve Grice

Business Development Manager at Ludgate Business Finance, College Governor at City of Wolverhampton College

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