You’ve decided that you need to use invoice finance to help with your cash flow. But before you sign on the dotted line, there are four key questions you need to ask your potential provider. Asking these questions will help you understand the terms of the agreement, what fees you’ll be paying, and what kind of customer service you can expect. It’s important to know all of this before you commit to using a particular provider. So, what are these four questions? Read on to find out.
What is the maximum amount that can be borrowed and how long does it take to set up an invoice finance facility?
The maximum amount that can be borrowed against your invoices will depend on the value of your outstanding invoices and your creditworthiness. Most invoice finance providers will advance up to 85% of the value of your invoices, but some may advance up to 100%. It can take a few weeks to set up an invoice finance facility as your provider will need to assess your business and creditworthiness. Once approved, you can start drawing down funding against your invoices immediately.
What are the fees for using the service?
The fees for using an invoice finance provider can vary depending on the type of service and the specific provider. However, there are a few common fees that you should be aware of:
Application fee: This is a one-time fee charged by some providers when you first apply for their services. -Service fee: This is a monthly or yearly fee charged by most providers in order to cover the cost of maintaining their service. -Funding fee: This is a fee charged by some providers when they fund your invoices. This fee is typically a percentage of the total invoice value.
Discounting fee: This is a fee charged by some providers when they discount your invoices. This fee is typically a percentage of the total invoice value.
It’s important to compare the fees charged by different providers in order to find the best deal.
It is important that you ask your potential invoice finance provider about all of the fees that you will be charged before you enter into an agreement with them. This way, you can ensure that you are getting the best deal possible and that you understand all of the costs associated with borrowing money through invoice finance.
What is the interest rate?
The interest rate is the amount of interest that you will be charged on the money you borrow from your invoice finance provider. This will be a percentage of the total value of the invoices that you have financed, and will be charged on a monthly basis.
In addition to the fees you should ask your potential invoice finance provider what the interest rate will be before you enter into an agreement with them. This way, you can ensure that you are getting the best deal possible and that you understand all of the costs associated with borrowing money through invoice finance.
What is the repayment period?
The repayment period is the length of time that you have to repay your loan. Typically, invoice finance providers will give you between 30 and 90 days to repay your loan. However, some providers may be willing to work with you to extend the repayment period if necessary.
Asking your potential invoice finance provider these four questions will help you to understand the terms of the agreement, the fees involved, and the quality of customer service you can expect. By getting this information upfront, you can be sure that you are getting the best deal possible and that you understand all of the costs associated with borrowing money through invoice finance.
Get in touch with us at Funding Bay for your invoice financing needs.
Check out our invoice finance calculator here.
