Business financing simplified

Selective Invoice Finance

Business financing simplified

Selective Invoice Finance
in a nutshell

Selective invoice finance is a flexible cash flow product designed to be a faster, flexible take on factoring and invoice discounting. As the name suggests, this product allows the borrower to select which invoices it wants to finance against. This allows businesses to lend against single invoices, single projects, or single debtors rather than against their full sales ledger.

Selective invoice finance tends to be delivered by lenders that have the ability to move quickly and flexibly, and as such, compared with sister products invoice discounting and factoring, selective invoice finance is very fast to set up (within the week). Further, the credit assessment is almost exclusively on the customer, which means even early-stage businesses can use selective invoice finance.

So a business can draw down flexibly from the invoices that they want to use and it can be set up quickly… So what is the drawback? Selective invoice finance tends to be pretty pricey and the lender tends to get very involved in validating your debts with your customer. The facilities are not designed to be used for more than 20/30% of your sales ledger as the process to fund is quite encumbering on the borrower (and the end customer).

Selective invoice finance tends to come with personal guarantees attached, and on occasion, debentures on all assets or the sales ledger.

Some of our lenders

Cash flow

Raising cash against unpaid invoices clearly frees up cash into the business for working capital purposes.

BENEFITS

Available to early stage

Early stage businesses are able to raise cash via selective invoice finance because the majority of the underwrite focuses on the sales process and creditworthiness of the debtor rather than the borrower.

BENEFITS

Fast

Selective invoice finance lenders will be taking a view on the debtor and the invoice much more than the borrower. As such the process can be really speedy.

BENEFITS

Flexible

Pick and choose which invoices to fund against, which makes it much more flexible than a full ledger facility like invoice discounting or factoring.

BENEFITS

Who is Eligible?

  • Businesses including early-stage businesses.
  • Must have business-2-business invoices.
  • Must sell to customers on terms.
  • Customers must have a track record of paying their bills.
  • Can sit alongside other loans.

How does it work?

1. Invoice assessment: The lender will assess the business and the customer and then assess the invoice(s) that are selected to be funded.

2. Funding: After the invoice is validated, the lender will then fund up to 85% against the invoice.

3. Rebate:  When the invoice is paid (to the lender), the unfunded amount (15%) minus the fees is rebated back to the company.

How Much Does It Cost?

Invoice discounting offers tend to have an array of fees associated, and understanding them is half the battle. As a headline, the 2 main fees to be concerned about are:

The additional fees will likely include fees for setting up, fees for bank transfers and refactoring fees, which are chargeable if an invoice needs to be reassigned to the borrower (eg in the event of becoming long overdue on payment terms).

FAQ's

With Confidential facilities – No, the debtors will not know that you have a facility in place. With disclosed facilities (or factoring) then your debtor will know about the arrangement. Disclosure is a perceived serious issue for lots of business owners; in the modern era however, invoice finance is understood by debtors and is par for the course, so in the vast majority of cases, we would not envisage the disclosure giving any type of problem.

Bad debt protection (credit insurance) is offered by most lenders, which may cost a little (between 0.2 and 0.6% on turnover), but protects the borrower from the insolvency of their debtors. Depending on the credit profile of the customers, the lenders may insist on this,or may offer it as an optional extra.

This varies from lender-to-lender. It is most likely to take 2-6 weeks, depending on how complex your sales process is and how large the facility needs to be

You will need; full filed accounts, latest management accounts, 12 months bank statements, aged receivables and creditors and then an ‘audit trail’ of a typical transaction with your main customer(s) – this will likely involve your contract, a purchase order, any sign off of works/proof of delivery, your invoice and then a remittance advice/bank statement confirming the invoice has been paid.

Qualifing questions

Can I Borrow?

Get Invoice Finance

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Get Invoice Finance

Please pop your details in the form below and we’ll get back to you within 24 hours.

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